Measuring Mortgage-Backed Securities Volumes

The Federal Home Loan Bank of Dallas released its Q1 2019 financial results on Tuesday. The bank reported a $58.4 million net income for the quarter.

The bank’s long-term held-to-maturity securities portfolio, composed mainly of U.S. agency residential mortgage-backed securities (MBS) totaled around $1.4 billion as of Q1, and the bank's long-term available-for-sale securities portfolio, comprised mostly of U.S. agency debentures and U.S. agency commercial MBS, totaled $16.1 billion as of March 31, 2019, as compared to $15.8 billion as of December 31, 2018. The bank’s mortgage loan portfolio totaled $2,594,412,000 in Q1 2019, up from $2,185,503,000 at the end of Q4 2018.

The Q1 mortgage-backed securities portfolio is slightly below the Q4 2018’s portfolio amount of $1.5 billion.

Moving forward, Freddie Mac has announced that its Investor Reporting Change Initiative (IRCI) will revise Single-Family investor reporting requirements, beginning in May 2019, including moving the investor reporting cycle from mid-month to end-of-month and updating remittance cycles. The GSE states that it is making the changes to promote alignment and industry standards for the Uniform Mortgage Backed Security (UMBS).

While the nonagency share of mortgage securitizations has increased gradually over the years, from 1.8% in 2016 to 4.4% in 2018, it has seen an uptick since February 2019, inching upwards to 7.15%, the report revealed. Nonagency securitization volume, including the Federal Home Loan Bank of Dallas, totaled $95.2 billion for 2018, a 41% increase over 2017.

The UMBS initiative will unify Fannie Mae and Freddie Mac’s currently separate mortgage-backed securities into a single, comingled security, called unified mortgage-backed security. The final rule requires the GSEs to align their policies, programs, and practices that can impact cash-flows to holders of to-be-announced TBA-eligible MBS. "The market had anticipated these actions, and the price differential between Fannie and Freddie securities had converged some time ago; prior to discussions on the UMBS, Freddie Mac needed to subsidize its security to the detriment of taxpayers," the report stated. How these UMBS, which go live on June 3, trade, will shape the MBS market.

Editor's note: This story originally contained incorrect totals for the bank's mortgage loan portfolio totals. DS News regrets the error and has corrected those figures.