Freddie Mac · OTC:FMCC
Freddie Mac — Single Security Initiative Exchange Webinar (2018)
32 slides from Freddie Mac's conference presentation, 2018
Slide 1: Single Security Initiative - Exchange Webinar
Single Security Initiative - Exchange Webinar
Slide 2: Single Security Overview
Single Security Overview • New uniform mortgage-backed security Single Security • Common features Initiative • Single TBA market • Issued and guarantee by Fannie Mae and Freddie Mac • Level 1: UMBS; Level 2: Supers Issuer/Guaranty • Supports commingling in second-level resecuritizations Structure •
Slide 3: Freddie Mac Exchange Overview
Freddie Mac Exchange Overview Freddie Mac’s exchange program offers PC holders entry into the new UMBS market Provide Gold PC investors Holders of Freddie Mac fixed-rate 45-day PCs/Giants will entry into the new, more have the option to exchange for 55-day UMBS/Supers (or liquid UMBS TBA market
Slide 4: Two Exchange Paths to Choose From
Two Exchange Paths to Choose From Freddie Mac will offer two exchange paths; the original path facilitated by Freddie Mac authorized dealers, through Freddie Mac’s Dealer DirectSM, and the recently developed second path with a “trade-like” approach, via Tradeweb 1. Dealer-facilitated Exchange DV
Slide 5: The Key Steps to Exchange
The Key Steps to Exchange Exchange Process 2. Transaction Entry 3. Settlement Via 1. Exchange 4. Accounting & Via Dealer or Dealer or Direct-to- Preparation Tax Reporting Tradeweb Freddie Mac Description Description Description Description Review 45-day holdings Submit valid collateral list Deliver
Slide 6: Exchange Preparation
Single Security Initiative Exchange Preparation Fannie Mae FreddieMac
Slide 7: Determine Exchange Strategy
Determine Exchange Strategy Determine your exchange eligible CUSIPS – http://www.freddiemac.com/mbs/exchange/data-files.html – The exchange data files can be seen here. To see the full list of mirrors issued to date and their corresponding Gold PCs, go to the Cumulative 45-day to 55-day Exchange A
Slide 8: How to pick a path? Here are key questions to think about
How to pick a path? Here are key questions to think about… Primary Considerations Dealer-Facilitated Path Direct-to-Freddie Mac Path via Tradeweb Freddie Mac will be your counterparty – is setting up a new Counterparty Is your dealer of choice an approved Exchange Dealer? counterparty easy, or a cum
Slide 9: Timing, Volume, and Transition
Timing, Volume, and Transition Exchange Transaction Timing and Volume Exchange transactions booked by noon can be settled T+1 if capacity is available; any transactions booked after noon can be settled a minimum of T+2 Securities must be delivered to Freddie Mac by 12 PM (Eastern time) on settle
Slide 10: Security Wire Instruction Preparation
Security Wire Instruction Preparation Investors or dealers using the exchange paths will need to set up Free Delivery / Free Receive wire instructions: 1. Deliver the 45-day security to Freddie Mac’s new holding account: o FHLMC WASH/2BD7 o ABA# 021033205 2. Expect to receive the 55-day Mirror del
Slide 11: Identification of Exchanges: SWIFT Recommendation
Identification of Exchanges: SWIFT Recommendation SIFMA Custodian Working Group developed this recommendation Leverages standard input in existing SWIFT message tags to identify exchange transactions Freddie Mac exchange ID would also be on the cash wire to tie all parts of the transaction tog
Slide 12: Splitting exchanges over $50M
Splitting exchanges over $50M 1 Any CUSIP exchanged over $50M will be split for security delivery into increments of $50M* AND… …for the Direct-to-Freddie Mac path …for the Dealer-facilitated path Be assigned 1 transaction ID by Be assigned 1 transaction ID for every CUSIP or group of CUSIPs en
Slide 13: Dealer-Facilitated Path: Exchange Entry and Settlement
Dealer-Facilitated Path: Exchange Entry and Settlement
Slide 14: Dealer-Facilitated Path: Features
Dealer-Facilitated Path: Features Counterparty is an approved Dealer Delivery vs. Payment (DVP) between Investor and Dealer Delivery Dealer delivers free to Freddie Mac (similar to today’s Giant model) Custodians interface with dealer Whole or partial CUSIPs may be exchanged, at the sub-ac
Slide 15: Dealer-Facilitated Path: Initial Setup
Dealer-Facilitated Path: Initial Setup Check our exchange website to view the list of dealers that have signed up to facilitate exchange. Reach out to your dealer if you do not see them on the list – http://www.freddiemac.com/mbs/exchange/ Establish dealer as counterparty if you have not worked
Slide 16: Dealer Facilitated Path: Transaction Booking & Settlement
Dealer Facilitated Path: Transaction Booking & Settlement Contact Dealer with request to exchange Through this path dealers can book transactions for current month or following month Settlement Blackout Dates • First 5 Business days of the month • Reg A & Reg B Settlement Dates • REMIC Collatera
Slide 17: Direct-to-Freddie via Tradeweb: Exchange Entry & Settlement
Direct-to-Freddie via Tradeweb: Exchange Entry & Settlement
Slide 18: Direct-to-Freddie via Tradeweb Path: Features
Direct-to-Freddie via Tradeweb Path: Features Counterparty is Freddie Mac Delivery is Free of Payment (FOP) Delivery Custodians directly interface with Freddie Mac as the issuer Whole or partial CUSIPs may be exchanged, at the sub-account level Capacity is around 50,000 exchanges / day acr
Slide 19: Direct-to-Freddie via Tradeweb Path: Initial Setup
Direct-to-Freddie via Tradeweb Path: Initial Setup Before an initial exchange with Freddie Mac, investors can expect an 2-3 week set-up with Freddie Mac / Tradeweb 1. Each investor will undergo a Know-Your-Customer (KYC) process performed by Tradeweb. 2. Each investor will need to satisfy appropri
Slide 20: Direct-to-Freddie via Tradeweb Path: Transaction Booking & Settlement
Direct-to-Freddie via Tradeweb Path: Transaction Booking & Settlement Exchanges can be entered directly through Tradeweb or via Investor’s OMS Exchanges can only be booked for current month Booking Blackout Dates vs. Settlement Blackout Dates • First 4 business days of the month • First 5 busine
Slide 21: Tradeweb Booking: Options for entering exchange transaction
Tradeweb Booking: Options for entering exchange transaction in Tradeweb Tradeweb will leverage its List Trade functionality to facilitate the exchange. However, the way you enter the exchange transaction into Tradeweb will depend on your own internal trade booking and downstream processing Unsolic
Slide 22: Tradeweb Ticket: Input Securities & Submit Request
Tradeweb Ticket: Input Securities & Submit Request Contact us: UMBS@tradeweb.com
Slide 23: Tradeweb Negotiation: Review & Confirm Exchange
Tradeweb Negotiation: Review & Confirm Exchange Contact us: UMBS@tradeweb.com
Slide 24: Tradeweb Post Trade: Detailed Ticket
Tradeweb Post Trade: Detailed Ticket Contact us: UMBS@tradeweb.com
Slide 25: Accounting & Tax
Single Security Initiative Accounting & Tax Fannie Mae FreddieMac
Slide 26: The SEC and IRS on Exchange
The SEC and IRS on Exchange Per the SEC, the exchange transaction may be treated as a minor modification (not a buy/sell) Freddie Mac, jointly with Fannie Mae and FHFA, sought advice from the IRS and SEC on the tax and accounting implications of exchange. The SEC responded that it has no objecti
Slide 27: Float Compensation
Float Compensation The IRS’ recent Revenue Ruling 2018-24 stated that Freddie Mac’s proposed exchange of 45-day Gold PC securities for 55-day Freddie Mac mortgage-backed securities will not be taxable. However, the IRS did not rule on the taxability of the associated float compensation payment. Fr
Slide 28: Considerations & What's Next?
Considerations & What’s Next?
Slide 29: Timing & Takeaways
Timing & Takeaways Remember there is a transition period initially. For a period of 3-6 months after exchange opens, Freddie Mac will increase settlements to T+2. We will also limit exchange transaction volume to begin, and gradually ramp up to the maximum daily capacity of 50,000 Based on CUSIP
Slide 30: Recommended Actions
Recommended Actions 1 2 3 4 Assess Plan Build Stay Informed You attended this Determine Exchange If Direct-to-Freddie Sign up for initiative strategy path is chosen, look updates webinar – into OMS system and good start! Begin organizing for KYC Use Freddie Mac tools how it might interfa
Slide 31: Questions?
Single Security Initiative Questions? Fannie Mae FreddieMac
Slide 32: Resources
Resources Freddie Mac Single Security web Subscribe to Single Security updates page Single Security Initiative Market Email questions to Call the Single Security Adoption Playbook Single_security@FreddieMac.com hotline: 800-336-3672 Or UMBS@tradeweb.com
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