The payment deferral option will go a long way in providing a much more seamless way for borrowers to get back on track in paying their mortgages, according to the CEOs of Fannie and Freddie.
A new rule proposed by the FHFA this week would ensure Fannie Mae and Freddie Mac “stay focused on their core mission and do not stray into business the market already serves well” after they exit conservatorship.
The trade group reiterated that Fannie and Freddie should not be permitted to exit conservatorship until further systematic, wholesale and long-term reforms are made permanent.
The MBA said a permanent, paid-for government backstop for agency mortgage-backed securities would be the ideal way to ensure a deep, liquid secondary mortgage market.
Eric Kaplan of the Milken Institute said the best possible explanation for the FHFA director’s remark is he thinks the GSEs may still have some of that profit-at-any-cost mentality that got them into trouble a decade ago.
Trade groups point out the irony of raising mortgage rates at a time when the Federal Reserve is spending more than $40 billion a month on agency securities in an attempt to lower the cost of buying or refinancing a loan.
Despite a sharp drop in GDP in the second quarter, Fannie economists expect mortgage originations to reach $3.4 trillion in 2020, the most since the banner year of 2003.
Since the financial crisis, Fannie’s single-family book of business has posted a loss rate of 31.5 basis points. In contrast, residential loans at commercial banks averaged a loss rate of 86 bps, 5.7 times higher.