Washington, D.C. – The Federal Housing Finance Agency (FHFA) today issued its quarterly Prepayment Monitoring Reports with data through the first quarter of 2020. The prepayment reports support the continued success of Fannie Mae and Freddie Mac's (the Enterprises) Unified Mortgage Backed Securities (UMBS), contribute to the efficiency and liquidity of the secondary mortgage market, and provide transparency and insight to market participants about how FHFA monitors the prepayment rates of the Enterprises' "To-Be-Announced" (TBA)-eligible securities.
FHFA promotes consistency of prepayment rates through monthly monitoring and established guidelines for general alignment. As part of this effort, FHFA issued a Request for Input (RFI) on Enterprise Pooling Practices on November 4, 2019. After careful review of the comments received in response to the RFI, FHFA has directed the Enterprises to further align their practices for evaluating seller and servicer prepayment related activities. The alignment actions include creating:
- A common framework for seller and servicer prepayment analysis;
- Common metrics for measuring seller and servicer performance;
- Aligned framework for common prepayment thresholds, triggers and actions; and
- Aligned policies to review, monitor, and sanction seller/servicer refinance practices.
FHFA has also instructed the Enterprises to recommend best practices for sellers and servicers in the evaluation and monitoring of broker and correspondent prepayment performance, including:
- Key patterns and measures that should trigger further seller and servicer review of broker/correspondent performance; and
- Developing a set of best practices to protect consumers, including evaluations to prevent predatory practices and ensure reasonable consumer protection.
Since UMBS forward trading began in March 2019, over $43 trillion worth of UMBS trades have taken place in the TBA market. Market pricing indicates that Fannie Mae and Freddie Mac MBS are trading at parity, creating a more level and competitive secondary mortgage market. FHFA remains committed to furthering the success of UMBS and appreciates the engagement of commenters on the Pooling RFI, representing a wide range of views and perspectives that FHFA found informative.
Media: Raffi Williams Raffi.Williams@FHFA.gov