The Federal Housing Finance Agency on Friday issued an update on the development of the Single Security, a mortgage-backed security to be issued by both Fannie Mae and Freddie Mac via a common securitization platform.
Each Single Security will be issued by either Fannie or Freddie and not cross-guaranteed by the others. It will have key features of Fannie’s current MBS and disclosures resembling those of Freddie’s bonds and will finance fixed-rate loans now eligible for financing through the TBA market. Lenders will remain able to contribute loans to multiple-lender pools.
The GSEs will be able to issue “second-level” Single Securities backed by first- or second-level securities from either GSE, and Freddie will offer investors the option to exchange legacy Freddie bonds for comparable Single Securities with compensation for the cost of the change in the payment delay.