With UMBS Looming, FHFA Issues Final Rule Aligning GSEs’ Practices

With housing GSEs Fannie Mae and Freddie Mac set to issue a single security -- the Uniform Mortgage-Backed Security -- starting in June, the Federal Housing Finance Agency today issued a final rule intended to ensure predictable cash flows to MBS investors. The rule directs the GSEs to harmonize their programs, policies and practices that affect the prepayment rates of to-be-announced-eligible MBS.

The new requirements, which take effect 60 days after publication in the Federal Register, apply both to the GSEs’ current offerings and to the new UMBS. FHFA made certain changes to the rule as proposed last fall to ensure the GSEs maintain consistent cash flows, make explicit the consequences of misalignment and direct the GSEs to lower the maximum mortgage note rate eligible for MBS inclusion.

ABA has been engaged with FHFA and other industry stakeholders as FHFA’s single security initiative has advanced. Read the final rule.