Freddie Mac has announced that it is closing the book on a temporary exchange offer used to make uniform trades of to-be-announced mortgage-backed securities possible several years ago.

The decision follows the reduction in the size of the market for older bonds that predated the arrival of UMBS in 2019. Around $1.5 trillion of Freddie's older participation certificates were outstanding at that time. Runoff and exchanges have since reduced outstandings by 94%.

Freddie Mac is giving investors who hold these legacy securities a full year to exchange them before the program ends entirely. Investors can conduct exchanges either through dealers using a portal Freddie has. They also can conduct them directly with Freddie, which uses the TradeWeb platform for this purpose.

The exchange of certain older Gold participation certificates and Giants for mirror securities allowed investors to adjust to a change in the length of payment delays when trading of Fannie and Freddie's MBS were harmonized. Older securities have a 45-day payment delay. Newer ones have a 55-day payment delay.

Freddie and Fannie also created a joint venture as part of the transition to uniform MBS trading. Their oversight agency rebranded that JV as US Fintech earlier this year. 

The Federal Housing Finance Agency, which also has been rebranded by current director Bill Pulte, has indicated that it will be exploring the possibility of making the JV's securities platform available to the private market. Pulte has rebranded the FHFA as US Federal Housing.

The latest deemed issuance ratio for UMBS was recently pegged at 52% for Freddie Mac and 48% for Fannie. That division, which is based on the universe of TBA-eligible securities over a 24-month period, compared to 51% and 48%, respectively.