skip navigation

UMBS: A Single Security Solution for Fannie Mae and Freddie Mac

Sean Johnson
Portfolio Manager


Give me six hours to chop down a tree and I will spend the first four sharpening the axe. ~Abraham Lincoln

Executive Summary

  • A new “single security”—called the Uniform MBS or UMBS—will be issued jointly by Fannie Mae and Freddie Mac that seeks to simplify investment by standardizing the MBS issues currently offered by each entity.
  • Western Asset advises investors to consider aggregating their mortgage concentration and exposure limits (formerly separately designated for Fannie Mae and Freddie Mac) for the combined UMBS investments.
  • UMBS issues will be available beginning June 3, 2019.

Fannie Mae and Freddie Mac will be making important changes to how their mortgage-backed securities (MBS) are issued, effective June 2019. As these changes may affect investors’ related MBS investments, this note describes the rationale for the change, how UMBS investments will work after the effective date and Western Asset’s view regarding the new securities. While June 2019 may sound fairly far in the future, getting a good handle on the new UMBS issues now will help investors prepare for what’s ahead and maintain the continuity of their investment portfolios.

Background

Fannie Mae and Freddie Mac will be making important changes to how their mortgage-backed securities (MBS) are issued, effective June 2019. As these changes may affect investors’ related MBS investments, this note describes the rationale for the change, how UMBS investments will work after the effective date and Western Asset’s view regarding the new securities. While June 2019 may sound fairly far in the future, getting a good handle on the new UMBS issues now will help investors prepare for what’s ahead and maintain the continuity of their investment portfolios.

Why the Change?

Fannie Mae and Freddie Mac will be making important changes to how their mortgage-backed securities (MBS) are issued, effective June 2019. As these changes may affect investors’ related MBS investments, this note describes the rationale for the change, how UMBS investments will work after the effective date and Western Asset’s view regarding the new securities. While June 2019 may sound fairly far in the future, getting a good handle on the new UMBS issues now will help investors prepare for what’s ahead and maintain the continuity of their investment portfolios.

The Common Securitization Platform (CSP)

Fannie Mae and Freddie Mac will be making important changes to how their mortgage-backed securities (MBS) are issued, effective June 2019. As these changes may affect investors’ related MBS investments, this note describes the rationale for the change, how UMBS investments will work after the effective date and Western Asset’s view regarding the new securities. While June 2019 may sound fairly far in the future, getting a good handle on the new UMBS issues now will help investors prepare for what’s ahead and maintain the continuity of their investment portfolios.

Adapting to TBA UMBS and Adjusting Concentration Limits

Fannie Mae and Freddie Mac will be making important changes to how their mortgage-backed securities (MBS) are issued, effective June 2019. As these changes may affect investors’ related MBS investments, this note describes the rationale for the change, how UMBS investments will work after the effective date and Western Asset’s view regarding the new securities. While June 2019 may sound fairly far in the future, getting a good handle on the new UMBS issues now will help investors prepare for what’s ahead and maintain the continuity of their investment portfolios.

Western Asset’s View

Fannie Mae and Freddie Mac will be making important changes to how their mortgage-backed securities (MBS) are issued, effective June 2019. As these changes may affect investors’ related MBS investments, this note describes the rationale for the change, how UMBS investments will work after the effective date and Western Asset’s view regarding the new securities. While June 2019 may sound fairly far in the future, getting a good handle on the new UMBS issues now will help investors prepare for what’s ahead and maintain the continuity of their investment portfolios.

Next Steps

Fannie Mae and Freddie Mac will be making important changes to how their mortgage-backed securities (MBS) are issued, effective June 2019. As these changes may affect investors’ related MBS investments, this note describes the rationale for the change, how UMBS investments will work after the effective date and Western Asset’s view regarding the new securities. While June 2019 may sound fairly far in the future, getting a good handle on the new UMBS issues now will help investors prepare for what’s ahead and maintain the continuity of their investment portfolios.

© Western Asset Management Company, LLC 2022. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorized and regulated by Comissão de Valores Mobiliários and Brazilian Central Bank. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.