The Federal Housing Finance Agency is requesting input on Fannie Mae’s and Freddie Mac’s pooling practices for the formation of To-Be-Announced-eligible Uniform Mortgage-Backed Securities.

According to the FHFA, it is also seeking public input about other policies and practices that might affect UMBS fungibility, including the enterprises’ oversight of UMBS prepayment speeds and alignment.

In June, the FHFA announced that its long-laid plans to launch a single security for loans backed by Fannie and Freddie had finally come to fruition.

Now, mortgage-backed securities for the GSEs are issued under a single security – Uniform MBS – replacing Fannie’s MBS and Freddie’s Participation Certificates so the two enterprises can trade in the same market.

In essence, the single security eliminates the liquidity differences that existed between the two markets, as Freddie’s lagging market reduced profits, ultimately taking money away from taxpayers. UMBS levels the playing field.

Then, two months later, the Urban Institute praised the successful launch of this “enormous undertaking,” which it said dramatically transformed a $5 trillion financial market.

Now, the FHFA said it is seeking to ensure that UMBS remains a source of stable, affordable liquidity for the U.S. housing finance system. The requested input will help FHFA determine whether further action or alignment is necessary to ensure reasonably consistent security cash flows and continued fungibility of the Enterprises’ UMBS.

The FHFA released a proposal for the enterprise pooling practices that would channel the majority of their production into larger, multi-lender pools in order to ensure more uniform cash flows for TBA investors, continue to allow issuance of specified pools under appropriate circumstances and align the GSE policies around the actions to be taken when a seller or servicer exhibits prepayment behavior outside acceptable norms. The FHFA asked for input as to whether these proposed pooling practices will facilitate the issuance of UMBS by other market participants.

The request for input will be open within 45 days of the publication of the document, and no later than December 19, 2019.