Page 31 - May-June 2018 GSE Report Flip Book

FANNIE MAE AND FREDDIE MAC MAJAYN-UAJRUYNE20210818
The GSEs they are a-changin’
In the white paper, GSE Reform Is Dead—Long Live GSE Reform!, Jim Parrott and Mark Zandi wrote:
...With a new director at the FHFA next year, we are likely to see a meaningful shift in the role of Fannie Mae and Freddie Mac. This likely means a reduction of both the GSEs’ footprint and the cross-subsidy they provide, and it may also mean an attempt to get the GSEs out from under the government’s wing altogether. If it is any of these, it will mean higher mortgage rates, less access to credit, and disruption to the housing and mortgage markets and broader economy.
The next FHFA director should instead expand the GSEs’ current credit risk transfer process to more sources of private capital, expand the common securitization platform into a more robust market utility, and make the GSEs more transparent. If the next FHFA director were to accomplish these key steps, it would put the nation into position to transition to a housing finance system in which mortgage credit is as available as it is today but in a way that poses less risk to taxpayers and the economy. (GSE Reform Is Dead—Long Live GSE Reform!, Jim Parrott and Mark Zandi, May 2018)
In the summer issue of SCI—Securitization Innovation in Focus, Structured Credit Investor wrote:
A new common security for Fannie Mae and Freddie Mac is one year away, with implementation set for June 2019. This shifts the ongoing debate over how to reform
the GSEs and how the U.S. mortgage market should function at a time when private companies are issuing securitizations, which look increasingly like those of the government enterprises. ...The clear direction of travel provided by FHFA focuses the debate on GSE reform, with various proposals to reshape the government enterprises, apparently facing
a shrinking window of opportunity. ...While the GSEs’ evolution is not complete, it is well underway. They have established and grown credit risk transfer (CRT) programs and are very different businesses to the ones that existed before the crisis.
...The FHFA and GSEs have accomplished perhaps 80% of the reform that is needed, but two things remain: creating actual private equity and the appropriate ownership structure,” said Andrew Davidson & Co.’s Richard Cooperstein. “Most market participants and commentators have moved on from the—erroneous—arguments about the need for many competitors as the solution. The GSEs’ CRT programs are highly efficient and are
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