Investment Operations

ISITC Publishes UMBS Market Practice for Single Security Initiative

Mortgage-Backed Securities

ISITC’s Settlements Working Group outlines guidelines for investment managers and custodians to navigate exchanges for the Uniform Mortgage Backed Security (UMBS)

ISITC, the industry trade group focused on developing standards and best practices in financial services operations, has announced the release of its latest version of the market practice document, “US Settlements and Confirmation Common Elements Market Practice.” ISITC’s Settlements Working Group developed the document to help firms prepare for the May 7th, 2019 commencement date of the Single Security Initiative, a joint initiative of Fannie Mae and Freddie Mac under the direction of FHFA to develop a common mortgage-backed security.

The market practice document outlines the information that investment managers are recommended to provide on the transactions for the UMBS, such as relevant key field requirements and usage guidelines.

ISITC said it collaborated with SIFMA and Freddie Mac on the initiative. SIFMA recently published a fact sheet that offers contextual descriptions around the exchange and how the market should proceed. Freddie Mac has attended numerous ISITC events over the past year to inform ISITC’s membership of the changes and provide a clear direction as to what processes will minimize the impact for all constituents in the market.

“There’s been a lot of debate about corporate actions and trade solutions in response to this mandate, so ISITC offered a common platform to bring all of the industry players together to determine the proper reaction for moving forward,” said Aundrea Jarvis, Co-Chair of ISITC’s Settlements Working Group. “The Single Security Initiative is a significant event for our industry. At ISITC, our membership’s diverse set of skills and subject matter expertise gave us a broader lens to solve for this issue. The ISITC Forums and Working Groups complement one another for quicker consensus and adoption of standards,” added Jarvis.

ISITC’s US market practice v39.3 was released in March 2019, and as other changes are announced by Freddie Mac, ISITC said it would amend as needed. The group also said their Settlements Working Group has held frequent calls to discuss the initiative and meets in person at ISITC’s events held throughout the year.