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Federal National Mortgage Association Message Board

  • snagslewis30 snagslewis30 Jun 19, 2013 11:42 AM Flag

    Housing Experts Plan the End of Fannie, Freddie? the street. wtf

     

    NEW YORK (TheStreet) -- Housing finance experts are increasingly taking the view that the future of mortgage finance cannot exist without a government backstop.


    A new paper authored by Mark Zandi, chief economist of Moody's Analytics, and former government officials from both sides of the political aisle calls for an end to government-sponsored enterprises Fannie Mae (FNMA_) and Freddie Mac (FMCC_), the bailed-out housing giants who now originate more than 80% of today's mortgages.

    "Fannie Mae and Freddie Mac would not be part of the future housing finance system. Their investment portfolios would be wound down, their securitization activities spun out into the new platform, and their guarantee functions sold to privately funded MBS insurers. Any remaining assets would be sold. Taxpayers would be repaid (to the extent possible) for their past support of Fannie and Freddie," the authors wrote.



    This largely reflects the thinking in Washington, where there is little political appetite to return the agencies back to private hands, even though both are now making record profits.

    But the new system will not be completely devoid of the government's involvement. The paper instead calls for a system where private capital takes the first-loss position, while the government will step in in the event of a catastrophic failure of the mortgage market.

    "In good times, when private capital is ample, private markets would provide a broad range of mortgage products with a limited government backstop. During times of severe economic stress, when private investors are unwilling to bear much risk, the government's market share would naturally expand," they wrote.

    This is in fact what happened in the financial crisis. The difference is, the government's role in the future would be "explicit and transparent" so that taxpayers are compensated for their risk.

    The authors consider a government backstop essential for a stable financial system that ensures borrowers get access to credit under all economic conditions. "...Though the previous housing system had serious flaws, government involvement meant that mortgage financing remained available during the financial crisis even while other parts of credit markets experienced considerable strains," the authors said. "Although costly and poorly conceived in the previous system, the government backstop eased the severity of the Great Recession that followed the subprime market collapse."

    NEW YORK (TheStreet) -- Housing finance experts are increasingly taking the view that the future of mortgage finance cannot exist without a government backstop.


    A new paper authored by Mark Zandi, chief economist of Moody's Analytics, and former government officials from both sides of the political aisle calls for an end to government-sponsored enterprises Fannie Mae (FNMA_) and Freddie Mac (FMCC_), the bailed-out housing giants who now originate more than 80% of today's mortgages.

    "Fannie Mae and Freddie Mac would not be part of the future housing finance system. Their investment portfolios would be wound down, their securitization activities spun out into the new platform, and their guarantee functions sold to privately funded MBS insurers. Any remaining assets would be sold. Taxpayers would be repaid (to the extent possible) for their past support of Fannie and Freddie," the authors wrote.



    This largely reflects the thinking in Washington, where there is little political appetite to return the agencies back to private hands, even though both are now making record profits.

    But the new system will not be completely devoid of the government's involvement. The paper instead calls for a system where private capital takes the first-loss position, while the government will step in in the event of a catastrophic failure of the mortgage market.

    "In good times, when private capital is ample, private markets would provide a broad range of mortgage products with a limited government backstop. During times of severe economic stress, when private investors are unwilling to bear much risk, the government's market share would naturally expand," they wrote.

    This is in fact what happened in the financial crisis. The difference is, the government's role in the future would be "explicit and transparent" so that taxpayers are compensated for their risk.

    The authors consider a government backstop essential for a stable financial system that ensures borrowers get access to credit under all economic conditions. "...Though the previous housing system had serious flaws, government involvement meant that mortgage financing remained available during the financial crisis even while other parts of credit markets experienced considerable strains," the authors said. "Although costly and poorly conceived in the previous system, the government backstop eased the severity of the Great Recession that followed the subprime market collapse."

    NEW YORK (TheStreet) -- Housing finance experts are increasingly taking the view that the future of mortgage finance cannot exist without a government backstop.


    A new paper authored by Mark Zandi, chief economist of Moody's Analytics, and former government officials from both sides of the political aisle calls for an end to government-sponsored enterprises Fannie Mae (FNMA_) and Freddie Mac (FMCC_), the bailed-out housing giants who now originate more than 80% of today's mortgages.

    "Fannie Mae and Freddie Mac would not be part of the future housing finance system. Their investment portfolios would be wound down, their securitization activities spun out into the new platform, and their guarantee functions sold to privately funded MBS insurers. Any remaining assets would be sold. Taxpayers would be repaid (to the extent possible) for their past support of Fannie and Freddie," the authors wrote.



    This largely reflects the thinking in Washington, where there is little political appetite to return the agencies back to private hands, even though both are now making record profits.

    But the new system will not be completely devoid of the government's involvement. The paper instead calls for a system where private capital takes the first-loss position, while the government will step in in the event of a catastrophic failure of the mortgage market.

    "In good times, when private capital is ample, private markets would provide a broad range of mortgage products with a limited government backstop. During times of severe economic stress, when private investors are unwilling to bear much risk, the government's market share would naturally expand," they wrote.

    This is in fact what happened in the financial crisis. The difference is, the government's role in the future would be "explicit and transparent" so that taxpayers are compensated for their risk.

    The authors consider a government backstop essential for a stable financial system that ensures borrowers get access to credit under all economic conditions. "...Though the previous housing system had serious flaws, government involvement meant that mortgage financing remained available during the financial crisis even while other parts of credit markets experienced considerable strains," the authors said. "Although costly and poorly conceived in the previous system, the government backstop eased the severity of the Great Recession that followed the subprime market collapse."

    NEW YORK (TheStreet) -- Housing finance experts are increasingly taking the view that the future of mortgage finance cannot exist without a government backstop.


    A new paper authored by Mark Zandi, chief economist of Moody's Analytics, and former government officials from both sides of the political aisle calls for an end to government-sponsored enterprises Fannie Mae (FNMA_) and Freddie Mac (FMCC_), the bailed-out housing giants who now originate more than 80% of today's mortgages.

    "Fannie Mae and Freddie Mac would not be part of the future housing finance system. Their investment portfolios would be wound down, their securitization activities spun out into the new platform, and their guarantee functions sold to privately funded MBS insurers. Any remaining assets would be sold. Taxpayers would be repaid (to the extent possible) for their past support of Fannie and Freddie," the authors wrote.
    This largely reflects the thinking in Washington, where there is little political appetite to return the agencies back to private hands, even though both are now making record profits.

    But the new system will not be completely devoid of the government's involvement. The paper instead calls for a system where private capital takes the first-loss position, while the government will step in in the event of a catastrophic failure of the mortgage market.

    "In good times, when private capital is ample, private markets would provide a broad range of mortgage products with a limited government backstop. During times of severe economic stress, when private investors are unwilling to bear much risk, the government's market share would naturally expand," they wrote.

    This topic is deleted.
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    • If the White House nominates economist Mark Zandi as the director of the regulator that controls Fannie MaeFNMA +4.92% and Freddie MacFMCC +2.80%, there shouldn’t be too many surprises about what Zandi thinks about housing finance.

      Associated Press
      Mark Zandi, chief economist at Moodys Analytics

      That’s because Zandi has been one of the most frequently quoted economists since the housing boom turned to bust. He’s a regular presence on cable television news shows, the industry panel circuit, and Capitol Hill testifying before lawmakers.

      Sentiment: Strong Sell

    • pump...

      Sentiment: Strong Sell

    • Building experts think differently !!!

    • This article supports FNMA. There is a need for gov't backing, that says it all. The US economy and global economy can not support the mortgage market without gov't backing. So with the wind down of FED MBS purchasing sending yields sky rocketing and global markets in the tank they will not wind down FNMA for years. Private equity will not be there for years so FNMA is needed until it is.

      You can not keep them under conservatorship anymore so while the years pass their will be a dividend paid to share holders and not Treasury. At a conservative .50 means your initial investment is paid back in a year.

      Do you not see the Fed's overall goal. Take FNMA and use them for 5 years to shore up market. Unwind MBS investment making FNMA more money than it should because of Feds keeping interest rates low. That profit that is enormous under normal circumstances pays back gov't quicker than normally possible.

      Fed shores up market, fed is repaid, FNMA returned to share holders. It is perfect scenario scripted beautifully by gov't.

    • MOODY'S GOT PAID BIG TIME FOR THAT ARTICLE.......FROM THE SHORTS... FULL OS B.S......THEY GOT FINED BIG TIME A FEW YEARS BACK FOR BOGUS RATINGS .............LONG AND STRONG....$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

    • Dude,I consider this is a bullish contra-indicator!!!
      Whenever big newspapers start singing the demise of an uber-profitable company; making BILLIONS in profits. Go the other way.
      No politician will be courageous enough to put the kibosh on FNMA & FMCC.
      Don't be fearful folks; just hold onto your shares or, if you can back up the trucks and double down.
      I will repeat: that this is a bullish contra- indicator. The story is built on hearsay.
      It has nothing new. It's just your typical daily dose of negativity from: Bloomberg, The Street and all that we've seen over the past 6 months.
      Listen to the tone of the article. It is a summary of the bearish argument built on hearsay.
      This article is a farce!!!

 
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