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SIFMA Urges FHFA to Strengthen Proposal to Implement the UMBS

SIFMA urged the Federal Housing Finance Agency ("FHFA") to strengthen a proposed rule on implementing the uniform mortgage-backed security ("UMBS").

In a comment letter, SIFMA stated it supports the "codification of alignment initiatives" to foster confidence in the "To-Be-Announced" ("TBA") market. SIFMA recommended that the FHFA:

  • enhance the definition of "alignment" by (i) focusing on the subset of mortgage-backed securities that affect TBA pricing and (ii) preventing "material deviations in the key pool characteristics that drive future prepayment activity"; and

  • adopt a final rule that references more robust practical remedies that the FHFA may implement for misalignment.

SIFMA said that the final rule should (i) give market participants "greater comfort" that alignment will be sustained over time and (ii) ensure that instances of misalignment are "short-lived."

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