MBA recommends turning GSEs into utilities

by Anna Sobrevinas02 Feb 2017
The Mortgage Bankers Association released a paper this week that detailed a plan to end the government’s conservatorship of Fannie Mae and Freddie Mac, as well as the association’s recommended approach for reforming secondary mortgage markets.

"Today's paper is intended to provide thoughtful recommendations on how to reform the GSEs while ensuring a healthy, robust secondary mortgage market emerges for both single-family and multifamily mortgages," said Rodrigo Lopez CMB, executive chairman of NorthMarq Capital and chairman of MBA. "The U.S. mortgage market requires global capital in order to maintain adequate liquidity through all economic cycles.  International and institutional investors will only fill that role if there is an explicit government guarantee on the securities, something that can only be obtained by congressional action." 

In the MBA’s plan, Fannie and Freddie would be “privately-owned utilities with a regulated rate of return,” and they could buy a specific federal guarantee from a newly created insurance fund. The guarantee would only be used for the securities and not their issuing entities.

Under the plan, Fannie and Freddie would be responsible for making sure credit is available to conventional single-family and multifamily mortgage markets, as well as ensuring access to all types of lenders and business models.

The MBA anticipates the release of the full paper in April, including in-depth end-state reform recommendations.

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