Kroll Bond Rating Agency Releases Research Report on the Government Sponsored Entity (GSE) Reform Debate

Business Wire


Kroll Bond Rating Agency released a research report today on the government sponsored entity (GSE) reform debate. Since the collapse of the U.S. financial markets in 2008, Congress and the policy community have been engaged in a broad-based discussion about the housing market reform, including making significant changes to the operations of GSEs such as Fannie Mae, Freddie Mac and Ginnie Mae. The Senate and the House of Representatives have both put forward proposals to alter or eliminate one or more of the GSEs and expand the role of private capital in the housing market, but neither proposal has sufficient support to pass Congress.

The GSE reform debate is focused largely on the issue of how first-loss and catastrophic loss should be distributed among private and public institutions. However, in our view, if the current regulatory regime with respect to loan origination does not achieve better balance between consumer protection and credit availability, then we expect that mortgage lending volumes and the overall supply of credit allocated to housing finance is likely to continue falling in 2015 and beyond. Additionally, if investors cannot be assured that their interests are protected in mortgage securitizations, private capital will be less available and more expensive.

KBRA does not believe that there is any likelihood of housing reform legislation passing Congress before the 2016 general election at the earliest. Accordingly, we believe that investors and financial institutions need to operate under the assumption that current law and regulation will remain in place for years to come.

KBRA believes that there is mounting evidence that the legislative and regulatory reaction to the 2008 subprime financial crisis is having a decidedly negative impact on mortgage lending and private mortgage finance. We believe that stricter regulation on mortgage lending and bank capital, and legal settlements incurred by financial institutions, are having a chilling effect on credit availability, and on the willingness of private investors to support mortgage credit more generally.

To view the report, please visit

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About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Christopher Whalen, 646-731-2366

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