An implementation date for the new uniform mortgage-backed security to be utilized by issuers of both government-sponsored enterprises’ MBS has been set by their regulator.
Back in 2012, the Federal Housing Finance Agency proposed a common securitization platform for use by both Fannie Mae and Freddie Mac.
The platform, which is operated by Common Securitization Solutions LLC — a joint venture between Fannie and Freddie — is expected to reduce interest rates, improve the lending process and cut transaction costs.
McLean, Virginia-based Freddie
implemented the CSP on some single-family fixed-rate MBS in November 2016. At this point, Freddie is processing around a thousand securities each month through the platform.
On Wednesday,
FHFA announced that the UMBS will replace Fannie’s and Freddie’s current offering of to-be-announced MBS on June 3, 2019.
With the implementation, Fannie will join
Freddie in using the CSP and CSS operations for these functions.
“This announcement provides market participants with certainty about the timing of the enterprises’ transition to UMBS and enables them to make the preparations necessary to ensure that the transition is smooth,” FHFA said. “The announcement coincides with the enterprises and CSS having attained three critical milestones: completion of key application development for issuance of the UMBS on the CSP, completion of system-to-system testing, and initiation of end-to-end (pre-parallel) testing.”
In its own statement, Washington-based Fannie noted that it intends to maintain a highly liquid housing finance market and create a stronger finance system.
Freddie issued a statement asking market participants to continue preparing to ensure a smooth transition.
“With our implementation in 2016 of the Common Securitization Platform, we paved the way for a combined Freddie Mac and Fannie Mae $3.5 trillion market of To-Be-Announced UMBS,” Freddie said.
