The Federal Home Loan Bank of Chicago (FHLBank Chicago) is aware of upcoming changes to the securities market and wants to keep our members informed of this initiative and its progress.

On June 3, 2019, Fannie Mae and Freddie Mac will begin issuing a new, common To-Be-Announced (TBA) eligible security known as the Uniform Mortgage Backed Security (UMBS™). UMBS will have common features and disclosures for fixed-rate 30-, 20-, 15- and 10-year securities. The Single Security Initiative is a joint initiative of Fannie Mae and Freddie Mac (the Enterprises), under the direction of the Federal Housing Finance Agency (FHFA), the Enterprises' regulator and conservator, to develop a common mortgage-backed security (MBS) that will be issued by the Enterprises to finance fixed-rate mortgage loans backed by one- to four-unit single-family properties.

Who does this impact?
Freddie Mac will provide holders of TBA-eligible and non-TBA-eligible fixed-rate participation certificates (PCs) and Giant PCs the option to exchange their eligible 45-day securities for 55-day Freddie Mac securities.  For TBA-eligible security exchanges, the 55-day corresponding security will be a UMBS or Supers; while for non-TBA eligible security exchanges, the corresponding 55-day security will be a Freddie Mac MBS. Members with eligible bonds will receive more information regarding the exchange process in April. 

Since UMBS mimics the features of existing Fannie Mae MBS, there is no need for holders for Fannie Mae securities to exchange.

What’s next for FHLBank Chicago?
We are working in conjunction with the Enterprises, the FHFA, and our custodian, JPMorgan, to ensure we are prepared to implement the change to UMBS. On June 3, FHLBank Chicago will accept UMBS as eligible collateral based on the published margins for Agency MBS in the Collateral Guidelines.

Questions?
If you would like to know more about the new UMBS or the exchange process, visit Fannie Mae and Freddie Mac’s Single Security Initiative Playbook. If you have any additional questions, please contact our collateral and safekeeping department at (855)-345-2244, Option 4, or collateral@fhlbc.com.

"UMBS" is a trademark of the Federal National Mortgage Association.