Trade Groups Raise Concerns About Changes to FHFA UMBS Pooling Practices

The American Bankers Association joined several housing and financial trade groups in a letter to the Federal Housing Finance Agency today highlighting concerns about recently proposed changes to uniform mortgage-backed security pooling practices used by Fannie Mae and Freddie Mac. In the letter, the groups warned that the proposals “could fundamentally change the MBS markets in ways that will have negative consequences for all our members as well as for mortgage borrowers.”

The groups’ concerns centered mainly around a proposal to replace the current regime of multiple pools with fewer, very large pools of mortgages in an effort to improve liquidity in the UMBS market. The groups urged FHFA to reconsider this approach, nothing that investors are likely to prefer more pools with more options for investment, rather than fewer pools that are less diverse.