The MBA on GSE Reform
As it stands, comprehensive reform of Fannie Mae and Freddie Mac is largely considered the last piece of unfinished business of the financial crisis. In 2008, Fannie and Freddie accepted a $188 Billion bailout and became government-sponsored enterprises (GSE). The bailout has been long repaid, yet the financial institutions remain GSEs. With policy reform on the horizon, the Mortgage Bankers Association released a paper on how GSE privatization might take place.
The MBA proposes that GSE-reform is critical to the long-term health of the secondary mortgage market because of these key features:
- Leveraging the benefits of competition and strong regulation;
- Ensuring equal market access for lenders of all sizes and business models;
- Preserving a strong public mission; and
- Maintaining a deep, liquid market for long-term single- and multifamily financing options.
The MBA supports a responsible end state to the conservatorship of Fannie Mae and Freddie Mac. To avoid the buildup that led to the housing crisis, the end state should employ transparent regulation and private capital primarily assuming most of the risk. This transition will not take place rapidly and require several years for adequate restructure.
A functional secondary mortgage market provides the liquidity needed to stabilize the housing economy. Privatization of Fannie Mae and Freddie Mac can only take place if this liquidity is maintained. After successfully repaying the bailout and several years of housing recovery, the MBA asserts that privatization is possible.
To read the full text of the MBA’s anticipated look at GSE reform, click here.
Sources: MBA.org, HousingWire