The Securities Industry and Financial Markets Association (SIFMA) announced on August 14 that newly originated loans to borrowers in high cost areas as defined in the Housing and Economic Recovery Act of 2008 (H.R. 3221) will qualify for incorporation into To-Be-Announced (TBA) eligible mortgage-backed securities (MBS).

When mortgage loan limits were temporarily increased in February, SIFMA recommended higher-balance mortgages be pooled separately, in part due to the temporary nature of the program. However, now that H.R. 3221 has permanently increased the loan limits for high cost areas, up to a maximum of $625,500, SIFMA is recommending that higher balance loans may comprise up to 10 percent of the total balance of a pool eligible for TBA delivery.

“We expect the market to smoothly digest the change made under the new SIFMA guidelines and continue to provide liquid and efficient pricing for mortgage securities,” said Sean Davy, managing director at SIFMA. “The importance of preserving the liquidity and stability of the TBA market cannot be overstated.”