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The Federal Housing Finance Agency ("FHFA") issued a final rule intended to improve the liquidity of Fannie Mae and Freddie Mac To-Be-Announced ("TBA") eligible mortgage-backed securities ("MBS"). The final rule requires Fannie Mae and Freddie Mac to maintain policies that promote aligned investor cash flows for both the current TBA eligible mortgage-backed securities and, upon its implementation, the uniform mortgage-backed securities ("UMBS"). The UMBS is "a common, fungible MBS that will be eligible for trading in the TBA market for fixed-rate mortgage loans backed by one-to-four unit (single family) properties."
The final rule, which goes into effect on May 6, 2019, codifies alignment requirements that FHFA implemented pursuant to the Fannie Mae and Freddie Mac conservatorships. Further, the FHFA stated that this final rule is critical to the transition and for the "ongoing fungibility" of the UMBS.
The FHFA also noted that Fannie Mae and Freddie Mac will begin to issue UMBS in place of their current TBA-eligible securities starting on June 3, 2019.
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