Page 8 - January-February-2018_GSE_Report

o y d
u t
a e a
o
o
M F
e t
u e o
Platform
difications to their business model and
be the most likely solution. This model
fixed rate MBS market with an implicit
uld also maintain a small retained GSE
Homeowner
Provide mortgages
Fee
G-Fee
FMIC Mtge Insurance Fund
P&I shortfall if first-loss is exhausted
FANNIE MAE AND FREDDIE MAC
FMIC Mkt Access Fund
JJAN.U- AFERBY. 22001188
e to serve as a backstop buyer in case market. The GSEs would maintain the CRT program would help reduce
d portfolio would also not be allowed to solution would likely be the least rket, as well as the agency debt and would be how much capital the GSEs in. The GSEs could be regulated like
retain only a portion of their earnings.
hnson-Crapo Plan)
ae and Freddie Mac, and providing for MIC. Aimed to keep conforming loan
5).
roduced in March 2014, was largely bill (June 2013). It aimed to expand the rance and create a single government ral Mortgage Insurance Corporation vide a common securitization platform
Lender
Source: Johnson-Crapo, TD Securities
MILKEN PUBLIC/PRIVATE PLAN
Figure 6: Milken Public/Private Plan
Principal & interest
Provide mortgages
Principal & interest, except in default
Sell mortgages or pools
Principal & interest, even in default
Ginnie Mae guarantees principal & interest payments
Distribute all non- catastrophic risk
Homeowner
Servicer
Source: Milken Institute, TD Securities
Lender
Ginnie Mae
Issuers
Interest Rate Investors
Credit
Investors,
FHA, VA
(Fannie, Freddie, new entrants)
FHFA’s Perspectives on Housing Finance Reform. In the white paper, FHFA’s Perspectives on Housing Finance Reform, the agency’s views broadly coincide with the Crapo-Brown proposal. FHFA proposes the creation of shareholder-owned secondary market entities (SMEs), which operate as utilities with regulated rates of return and appropriate capital requirements and support the single-family and multifamily markets.
Fannie and Freddie would be “reincorporated as private, shareholder-owned corporations.” The SMEs would mutually own the Common Security Platform that issues a single-security, backed by conforming loans, wrapped with an explicit catastrophic government guarantee. The government’s fee for the guarantee would be paid into the Mortgage Insurance Fund. Under the proposal, SMEs would be required to of oad risk to the private market through Credit Risk Transfers. The SMEs would provide uniform pricing for mortgages and would remain subject to “affordability-oriented obligations.”
“We see this document as helpful to efforts in the Senate to enact housing nance reform by giving FHFA’s seal of approval to the basic framework that banking committee leaders have been working on,” said Jaret Seiberg, a Cowen Washington Research Group analyst.
Legislative Initiatives
In February, Senate negotiators released their 29th draft of the Corker Warner “discussion draft,” which re ects the consensus of emerging principles for housing reform among stakeholders in the mortgage complex. The proposal, based largely upon MBA’s model, aims to provide a simpli ed
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