48
ALIGNING WITH
NEW UMBS RULES
Freddie Mac recently revised its
Investor Reporting Change Initiative's
(IRCI) single-family investor reporting
requirements, including moving the investor
reporting cycle from mid-month to end-of-
month and updating remittance cycles.
e GSE stated that it was making the
changes to promote alignment and industry
standards for the Uniform Mortgage Backed
Security (UMBS).
According to analyst teams at Morgan
Stanley and JPMorgan, the joint Fannie
Mae-Freddie Mac security, UMBS, may
cause a rise in volatility. In an article
published by Bloomberg, Morgan Stanley
and JPMorgan analysts discuss their
recommendations on the agency MBS sector
following the recent widening of mortgage
spreads.
In the article, Morgan Stanley advised
investors to "go long" on the sector, citing a
wider 30-year Fannie Mae current coupon
Treasury option-adjusted spread as positive.
"e Fannie Mae current coupon spread
over a blend of Treasury 5- and 10-year
notes, a popular valuation method for
mortgage investors, has widened 12 basis
points to 85 since March 26, when it closed
at its tightest level since January 31, 2018,
according to data compiled by Bloomberg,"
reporter Christopher Maloney writes. "Its
average level last year was 82 basis points."
Freddie Mac's IRCI updates were
effective beginning with the June 6, 2019,
monthly factor/disclosure for all currently
issued PCs. is initiative will also apply to
the new Freddie Mac UMBS and MBS.
In March, the Federal Housing Finance
Agency (FHFA) issued a final rule that
requires Fannie Mae and Freddie Mac to
align programs, policies, and practices that
affect the cash flows of "To-Be-Announced"
(TBA)-eligible Mortgage-Backed
Securities. e agency statement indicated
that this is a major step forward. "is rule
demonstrates FHFA's commitment to the
success of the UMBS, which will promote
liquidity and efficiency in the secondary
mortgage market," said Joseph Otting,
FHFA Acting Director.
