In the coming months, the Federal Reserve Bank of New York (New York Fed) Open Market Trading Desk (the Desk) will continue the process of streamlining the administration of agency mortgage-backed securities (MBS) held in the System Open Market Account (SOMA). This will initially involve exchanging certain Freddie Mac MBS that have a 45-day payment delay for 55-day payment delay securities. Once these exchanges are completed, CUSIP aggregation of certain Fannie Mae and Freddie Mac securities that have a 55-day payment delay will begin. Fannie Mae and Freddie Mac aggregation will be conducted separately, rather than by comingling the two issuers. No inferences should be drawn about future monetary policy actions from the conduct of these actions.
Exchanges and CUSIP aggregation are commonly used by market participants to reduce the administrative costs and operational complexity associated with managing an agency MBS portfolio. The SOMA currently holds approximately 30,000 individual MBS CUSIPs and the exchange and aggregation processes is expected to reduce that number to less than 10,000. These processes do not impact the size of the SOMA MBS portfolio, as all payments on the underlying agency MBS flow through to the newly aggregated and exchanged CUSIPs. Exchanges slightly modify the MBS as the new cash flows are received 10-days later, which Freddie Mac provides compensation for at the time of the exchange.
The full listings of all the agency MBS CUSIPs that are included in exchanges and aggregations will be publicly available. The New York Fed publishes detailed data on all settled SOMA agency MBS holdings on its public website on a weekly basis. As these processes take place, this weekly publication will include a listing of the individual agency MBS CUSIPs that have been received. Fannie Mae provides information about aggregated CUSIPs and Freddie Mac provides information about exchanged and aggregated CUSIPs on their public websites.
Additional information can be found in the Desk’s Frequently Asked Questions.