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2 is better than 1 … or is it?

The Federal Housing Finance Agency (FHFA) has announced that their implementation of new “Uniform Mortgage-Backed Securities” will officially begin on June 3, 2019. This “single security” is a joint initiative by Freddie Mac and Fannie Mae to create a common securitization platform backed by fixed-rate 10-to-30-year mortgages.

Mel Watt, Director of the FHFA, stated years ago that this plan is to “recognize that the primary role of Fannie and Freddie is to no longer stop the bleeding in mortgages, but rather to now provide a liquid position to the housing finance market”. Today, he is urging the industry to get ready to ensure a smooth and successful implantation. The FHFA also estimated that this endeavor will save them about $400 million to $600 million per year.

If you are like me, you might be wondering what this all really means to rest of us. Scanning around on the internet and HousingWire has probably left me with more questions than when I began, but I certainly know this will have an impact on everyone involved in the housing market.

From what I can see (especially here), there shouldn’t be much change for us originators. Underwriting to both sets of guidelines, merged into one, is already happening in a way. Lenders that are sellers/servicers also appear to continue conducting business directly with Freddie and Fannie, both still under their respective guidelines.

To me, the trickle-down impact to mortgage lenders and their originators comes in the form of the all mighty dollar, PRICING. And the impact on the secondary market is where I find little direction. Will Freddie and Fannie be able to ultimately deliver better pricing? Will fixed-rate products close in on the pricing gap with ARM products? Will Lenders be able to pass better pricing down to their borrowers? If so, I would certainly welcome this initiative and whatever process changes or extra disclosure requirements it might bring 😊.

Thanks as always,


Photo by @bamagal on Unsplash

The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.

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