C3-7-02, Initiating an MBS Sale (07/07/2021)

If a lender sells MBS, its trade may be TBA or specified. With a TBA trade, the lender may deliver any UMBS 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 ProgramC3-1-01, 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. 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.

Note: Settlements cannot occur on holidays.

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-1-02, List of ContactsE-1-02, List of Contacts.

For newly issued securities, if a lender opts for an “original issue” settlement instead of “delivery vs. payment,” 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 notification 48 hours 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:

• MBS product,

• amount of the trade,

• coupon rate,

• settlement date,

• 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 for the respective trade, unless the lender notifies the Operations team of any errors in the confirmation by close of trading on the next trading day.  Lenders will be responsible for any resulting economic differences from a trade if they fail to notify Fannie Mae of any errors in the confirmation within the specified window.

Note: For lenders executing trades with Fannie Mae via Fannie Mae’s electronic trading platform, the lender’s trade details for the bid or offer will be available through the platform using appropriate login credentials.