Independent Banker - September 2018 - 25

Next: Success in the export finance niche
guaranteed by either Fannie Mae or Freddie Mac.
Soon, Fannie Mae and Freddie Mac will begin issuing
new, common uniform mortgage-backed securities
(UMBSs) in place of their current, separately issued mortgage
securities. There will also be a voluntary exchange
process for investors who want to convert " old " MBSs to
UMBSs. The goal is to help foster increased liquidity, to the
benefit of the U.S. housing market. Left unsaid is that this
should represent a cost savings through consolidation of
overhead. This column will give an overview of the Single
Security Initiative (SSI).
Purpose and objective
On Sept. 6, 2008, the Federal Housing Finance Authority
(FHFA) placed both Fannie Mae and Freddie Mac into
conservatorship. After stabilizing the two agencies and
ensuring their ongoing support of mortgage and housing
markets, the FHFA began to focus on longer-term plans to
strengthen mortgage markets. Among these plans was the
development of a Common Securitization Platform for use
by both agencies, and for the SSI to develop a UMBS.
The goals (although they haven't been publicly stated)
seem to focus on fostering as much liquidity as possible,
potentially to provide a cost savings and to provide a platform
that other secondary market participants could use
in the future. Think private capital insurance-wrapped
mortgage securities.
Effect on community banks
For community banks, this should largely be a non-event,
as no action is required on current holdings. Nor does it
change anything about the underlying collateral, structure
or cash flows of current securities. Most of the work
is technical in nature, the brunt of which falls on the data
providers, pricing vendors and broker-dealers.
Depending on the specifics of the exchange process,
especially tax considerations, it may provide an avenue
to consolidate portfolio line items, as Fannie and Freddie
bonds can exist in a single pool.
The new UMBS platform is planning to go live in June
2019. Community bankers who hedge their mortgage originations
in the TBA market will be the first to see changes,
as early as February 2019, as the TBA market makes
the transition.
What do you do now?
Not much. Just being aware of this puts you ahead of the
game. As the June 2019 go-live date approaches and more
information is available, expect further updates from the
broker-dealer community. As always, simply knowing and
Education on Tap
James Plunkett
Webinar series continues
ICBA Securities and its exclusive broker, Vining
Sparks, present the next segment of their 2018
webinar series on Sept. 18. James Plunkett will
discuss " Mortgage Market with a Focus on
CMOs. " One hour of CPE is available. To register,
visit viningsparks.com
UMBS analysis available
Vining Sparks released a Strategic Insight
dated May 23, 2018, that discusses in-depth
the Single Security Initiative. For your copy,
contact the authors or your Vining Sparks sales
rep. Vining Sparks will also be updating sample
investment policies, its Client Access portal and
its popular Performance Profile as information
becomes available.
understanding your investment portfolio goes a long way.
A happy possibility is that your MBS performance could
be enhanced through agencies' cost savings and through
the improved liquidity of your current holdings. Stay
tuned for developments.

ICBA is on the job
Ron Haynie, senior vice president of mortgage
finance policy for ICBA, advises the FHFA and the
housing agencies on the impact of their policies
on community banks. Ron can be reached at
202-821-4436 or ron.haynie@icba.org
independentbanker.org Q 25
http://www.viningsparks.com http://www.independentbanker.org
Independent Banker - September 2018

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