In an effort to provide more liquidity and lower costs for borrowers, Freddie Mac has announced that it will begin issuing new 55-day “mirror” mortgage-backed securities. These securities will be available for the current population of exchange-eligible 45-day Freddie Mac Gold Participation Certificates (PCs) and Giant PCs to facilitate the implementation of the Single Security Initiative on June 3, 2019, according to the press release.
“We believe the early issuance of mirror securities will enable market participants to both analyze their holdings and build in pricing and disclosure in advance of the official exchange offer next May,” said Mark Hanson, SVP of securitization at Freddie Mac. “This is an important step toward the implementation of the Single Security Initiative in June 2019, paving the way for a combined Freddie Mac and Fannie Mae $3.5 trillion market of a To-Be-Announced Uniform Mortgage-Backed Security. The Single Security Initiative is intended to strengthen the U.S. mortgage market by providing more liquidity and lowering costs for borrowers.”
The initial issuance of these mirror securities are expected to begin on August 7 and will take approximately 8 weeks. Mirror security disclosures will be available on August 10, 2018. The organization anticipates over 70,000 mirror securities to be issued in this period, corresponding to the population of exchange-eligible PCs and Giants. Freddie Mac will continue to issue mirror securities as new exchange-eligible 45-day securities are produced, the statement said.
All the mirror securities will be held in a Freddie Mac account at the Federal Reserve until the organization commences the exchange offer in May 2019. Investors will then be able to exchange eligible 45-day PCs and Giants for corresponding 55-day mirror mortgage-backed securities on a one-for-one basis. Gold PC and Giant holders are expected to be able to choose between two alternative exchange paths: one facilitated by a dealer using Freddie Mac’s Dealer DirectSM portal or directly with Freddie Mac.