Fannie Mae and Freddie Mac Launch UMBS

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On Monday, Fannie Mae and Freddie Mac marked the completion of their Single Security Initiative with the launch of the Fannie Mae and Freddie Mac marked the completion of their Single Security Initiative with the launch of the Uniform Mortgage-Backed Security (UMBS).

“UMBS is the result of close collaboration with FHFA, Freddie Mac, Common Securitization Solutions, and hundreds of housing finance stakeholders and we congratulate all involved on this achievement,” said Renee Schultz, SVP, Capital Markets, Fannie Mae in a statement. “We remain focused on ensuring that all market participants continue to make a smooth transition to UMBS and maintaining a highly liquid housing finance market.”

“The UMBS is one of the most significant accomplishments in our decade-long effort to improve the U.S. housing finance system,” said Mark Hanson, SVP, Securitization, Freddie Mac in a statement. “Americans will benefit from the efficiency and standardization brought about by this new common security. The success of the initiative is a direct result of Freddie Mac’s collaboration with Fannie Mae, Common Securitization Solutions, FHFA, and thousands across the U.S. housing finance industry. We are grateful for their hard work, and we join them in celebrating this achievement.”

Critics of the new Security argue that it may not lower mortgage rates as intended.  Some see the combined bond as “more than five-year process to unify a roughly $4.4 trillion pile of agency MBS currently split between the two government-sponsored enterprises.”

“It already was the most liquid market in the world in many respects. What are they trying to fix, exactly?” Walt Schmidt, Head of Mortgage Strategies at FTN Financial in Chicago, told Bloomberg.

According to experts, the final outcome can’t be said until today’s launch.

“To some extent June 3 will be a bit analogous to Y2K, you don’t know if everything will be successful until after the fact,” Jay Bacow, head of Morgan Stanley’s MBS research team, told Bloomberg. He added that “the mortgage market is second to Treasuries in terms of fixed-income liquidity and it’s challenging for us to see it losing that distinction under UMBS.”





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