Freddie Mac  recently announced that it has completed the exchange of certain eligible Freddie Mac 45-day payment delay Gold Mortgage Participation Certificates (PCs) and Giant PC securities held in its portfolio for Freddie Mac 55-day payment delay, To-Be-Announced (TBA)-eligible Uniform Mortgage-backed Securities (UMBS) Mirror Certificates.
“The successful exchanges of Freddie Mac Gold PCs for UMBS Mirror Certificates by our portfolio marks another important milestone in our progress toward the realization of a Single Security,” said Mark Hanson, SVP of Securitization for Freddie Mac. “Although this exchange included a relatively modest amount of unpaid principal balance in the company’s own portfolio, the exchanges demonstrate the Dealer Direct portal’s readiness for the planned offer to investors to exchange eligible Gold PCs and Giant PCs for corresponding Mirror Certificates.”
The UMBS is part of the Federal Housing Finance Agency’s (FHFA) 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac. The plan includes a strategic goal of developing a new securitization infrastructure for Fannie Mae and Freddie Mac, through Common Securitization Solutions (CSS), a joint venture owned by the GSEs.
According to Freddie Mac, investors can expect to begin to exchange in May 2019, through either dealers using Freddie Mac's Dealer Direct portal, or directly with Freddie Mac as facilitated through Tradeweb. The FHFA states that “the issuance of UMBS should improve the overall liquidity of the Enterprises' securities and help ensure liquidity of the nation's housing finance markets.”
Freddie Mac notes that the security characteristics of the new 55-day securities will mirror their corresponding 45-day securities, with the new 55-day securities receiving a new prefix, pool number, CUSIP, and issuance date. Additionally, the cash flows of the UMBS, Supers, MBS or Giant MBS will ultimately be backed by the same loans as the original PC or Giant PC, and Freddie Mac states that the factor of the 55-day security will match the current factor of the corresponding eligible 45-day security at the time of exchange.
Learn more about the upcoming exchange here.