Uniform MBS, or UMBS, is a standardized mortgage-backed security that Fannie Mae and Freddie Mac both issue under identical terms so investors can treat them as interchangeable in the To-Be-Announced forward market. It launched on June 3, 2019, replacing the two agencies’ previously separate securities and merging their trading markets into one. Each enterprise still issues and guarantees its own pools, but the shared structure means a TBA buyer accepts delivery of either without caring which one shows up.
Why UMBS Replaced Two Separate Securities
Before UMBS, Fannie Mae and Freddie Mac each ran their own MBS program with its own TBA market. Fannie Mae’s market was larger and more liquid, so its securities fetched higher prices. Lenders preferred to sell loans to Fannie Mae as a result, which kept Fannie Mae’s market deeper and Freddie Mac’s thinner.
To stay competitive, Freddie Mac subsidized its guarantee fees at a cost that sometimes reached $500 million a year. Because both enterprises were in Federal Housing Finance Agency conservatorship and sending dividends to the U.S. Treasury under Senior Preferred Stock Purchase Agreements, those subsidies effectively came out of taxpayer pockets. The FHFA concluded that a single, interchangeable security would close the pricing gap, end the subsidy, and produce a deeper combined market.
How a UMBS Is Structured
A UMBS is a pass-through security backed by fixed-rate mortgages on one-to-four-unit residential properties. Fannie Mae and Freddie Mac each issue and guarantee their own UMBS, and they do not cross-guarantee each other’s securities. What makes the two interchangeable is a set of shared features baked into every pool.
- A standardized 55-day payment delay between when borrowers pay and when investors receive their share. This matches the convention Fannie Mae had used historically; Freddie Mac’s legacy Gold Participation Certificates had carried a 45-day delay and had to be converted.
- Pooling restrictions that cap the note rate on any loan at no more than 112.5 basis points above the security coupon, with a maximum servicing fee of 50 basis points.
- TBA eligibility. In a TBA trade the parties agree on coupon, maturity, face value, price, and settlement date, but the specific pools delivered are not identified until two days before settlement. Active coupon cohorts trade in 50-basis-point increments across 30-, 20-, 15-, and 10-year maturities.
Ginnie Mae, which guarantees securities backed by FHA and VA loans, runs its own separate TBA market and is not part of the UMBS program.
Supers, Megas, and Specified Pools
UMBS sit at the center of a broader family of agency MBS instruments. Supers are single-class, pass-through, TBA-eligible securities backed by groups of existing UMBS or other Supers. Because they are TBA-eligible, Supers from either enterprise can contain commingled collateral from both. Investors use them to consolidate small or paid-down pools, cut administrative overhead, or build specific characteristics like broader geographic diversity.
Megas serve a similar consolidation purpose but are not TBA-eligible and are restricted to Fannie Mae-issued collateral. They exist for pools that fall outside TBA eligibility criteria.
Alongside the generic TBA market, a large specified-pool market trades UMBS whose loans all share particular origination characteristics such as low loan balance, high loan-to-value ratio, low FICO score, investor-property backing, or geographic concentration in states like New York or Texas. Specified pools trade at a premium, or “pay-up,” over TBA prices because their prepayment behavior is more predictable. As of late 2023, specified cohorts made up roughly 25% of the Bloomberg US MBS Index, with generics making up the rest. For very small loans, the pay-up can be the difference between a profitable origination and a loss.
How Prepayment Alignment Is Enforced
The whole structure only works if investors trust that a Fannie Mae UMBS and a Freddie Mac UMBS will behave the same way, especially on prepayment. The FHFA codified the UMBS program in a final rule published March 5, 2019, effective May 6, 2019, and codified at 12 CFR Part 1248. The rule’s purpose is to keep prepayment rates on the two enterprises’ UMBS close enough that the market treats them as fungible.
The regulation measures three-month conditional prepayment rate divergences between corresponding cohorts, defined as groups of securities sharing the same coupon, maturity, and loan-origination year with combined outstanding balance above $10 billion. It then sorts the result into three tiers.
- Alignment: CPR divergence under 2 percentage points for a cohort, or under 5 percentage points for its fastest-paying quartile.
- Misalignment: divergence of 2 percentage points or more for a cohort, or 5 or more for the fastest-paying quartile. The enterprise must report any misalignment to the FHFA.
- Material misalignment: divergence of at least 3 percentage points for a cohort, or at least 8 for the fastest-paying quartile. The FHFA can require remedial action, including program termination or forcing the enterprises to adopt comparable practices.
Both enterprises must run internal governance that flags any proposed policy change capable of affecting prepayment alignment and submit it to the FHFA before implementation. The FHFA publishes quarterly Prepayment Monitoring Reports tracking cohort-level data and watches pool characteristics including weighted-average coupon, maturity, loan age, FICO scores, loan-to-value ratios, and geographic distribution. It can adjust thresholds temporarily in response to market conditions, impose civil money penalties, and exclude programs affecting no more than $5 billion in unpaid principal balance under a de minimis exception.
What the Market Looks Like Now
Research from the Federal Reserve Bank of New York found that consolidation increased liquidity and prices for Freddie Mac MBS without measurably reducing liquidity for Fannie Mae MBS. Prices began converging before the June 2019 launch as the market anticipated the gains. Freddie Mac was able to grow its fee income by dropping the price discounts it had used to compensate lenders for its securities’ relative illiquidity.
The deemed-issuance ratio, which the FHFA calculates annually to approximate each enterprise’s share of UMBS issuance for tax-reporting purposes, tracks the shift. In the first three years of the program (2019–2021) the ratio was 60% Fannie Mae and 40% Freddie Mac. By 2024 and 2025 it had narrowed to 53/47 and 51/49. For 2026 it flipped for the first time, to 48% Fannie Mae and 52% Freddie Mac.
Trading remains substantial. Through February 2026, agency MBS averaged $396.8 billion in daily trading volume, up 7.2% year over year.
The Conservatorship Question
UMBS fungibility rests in part on the implicit government backing that Fannie Mae and Freddie Mac carry as conservatorship entities. Both have been in FHFA conservatorship since 2008, and periodic proposals to end that arrangement raise questions about what would happen to the UMBS guarantee structure.
Experts have cautioned that exiting conservatorship without an explicit government guarantee could push investors to demand higher returns on UMBS, which would translate into higher mortgage rates for borrowers. Proposals to preserve a government backstop through a fee-based guarantee have been discussed, though analysts note those fees would also raise borrowing costs. As of mid-2026, exit efforts had largely stalled, and common stock in both enterprises had fallen roughly 40% in the first half of the year.