If a lender sells MBS, its trade may be TBA or specified. With a TBA trade, the lender may deliver any MBS meeting eligibility requirements as defined by SIFMA. A specified trade means that a specific MBS is being traded and only that security can be delivered in satisfaction of the trade. TBA trades settle on the SIFMA settlement dates (see Pool Settlement Dates).
See C3-1-01, General Information About Fannie Mae’s MBS Program, for information on MBS prices and their determinants. Prices of Fannie Mae MBS are quoted in 32nds of a percent for both immediate and forward delivery issues.
The lender must plan its settlement date to be sure it can deliver the securities as scheduled. In particular, the lender must allow sufficient time after loan closing for the processing of the documentation package. Any errors in the package can result in a delay in settlement.
Lenders may settle trades for newly issued securities on any day of the month in which they are issued. However, lenders cannot settle the trade during the first four business days of the month if it involves securities issued in a prior month. When a trade is settled on a “regular” settlement date, it will occur on a date that is predetermined by SIFMA, based on a schedule that changes periodically. When a settlement date falls on a holiday, Fannie Mae will announce an alternative settlement date in advance.
The method of funding the sale of a security depends on the settlement method the lender chooses when delivering the pool to Fannie Mae. Lenders that want to use an early funding settlement option such as As Soon As Pooled Sale (for pools) or As Soon As Pooled Plus (for whole loans) must execute a special agreement that provides the specific terms for the type of transaction it is using. Lenders interested in using an early funding settlement option should contact the Capital Market Sales Desk. See E-1-03, List of Contacts.
The standard settlement option for newly originated MBS is called an “original issue” settlement because the security is assigned directly to Fannie Mae when the pools are delivered. To arrange for an original issue settlement, lenders must specify Fannie Mae’s account in the wiring instructions on the Delivery Schedule (Form 2014) it submits when the pool is delivered. Lenders using this option must follow SIFMA’s guidelines and submit the allocation pool prior to settlement.
Existing MBS must be funded through “delivery vs. payment” (or a “delivery against funds” or “existing issue”) settlement option. Under this settlement option, when Fannie Mae receives the security, it credits the lender’s account at the institution that wires the security to the Desk.
If a lender has not sold the securities to an investor before it delivers loans to Fannie Mae and has not elected to use the “original issue” settlement option, Fannie Mae will issue the securities to the lender.
When contacting the Desk to request a firm bid/offer, the lender must be prepared to specify the following information:
amount of the trade,
unique characteristics of the pool that will back the security.
Fannie Mae’s Sales Desk will convey a bid/offer for the security to the lender. If the lender accepts the firm bid or firm offer, the Sales Desk will lock in the bid or offer and verify the trade details in a recorded telephone conversation with the lender.
That evening, Fannie Mae will send the lender a written confirmation statement that includes the details of the trade such as the trade number, date, amount, price, the coupon rate, and the settlement date. The confirmation, taken together with the relevant sections of this Guide, constitutes conclusive evidence of the terms between Fannie Mae and the lender with respect to the transaction to which the confirmation relates, unless the lender promptly notifies the Desk of any errors in the confirmation.
The table below provides references to the Announcements that have been issued that are related to this topic.