The Cato Institute is a conservative think tank and a quick read of Calabria’s blog makes it sound like he favors getting the government out of the MBS guaranty business...
One month does not a trend make, but early indicators hint that mortgage lenders may be stretching the credit box to boost volume. Fannie Mae and Freddie Mac issued $91.71 billion of single-family mortgage-backed securities in January, a stiff 18.3 percent drop from the previous month. Some of the decline was the result of Fannie’s heavy volume in December, when its business flow was catching up from an unusually slow November. But mortgage interest rates have edged up, and there is widespread expectation in the industry that refinance volume in 2017 will drop sharply from last year. Higher rates could also tarnish a housing market that’s bumping up against affordability and supply issues.
Treasury secretary nominee Steve Mnuchin still has GSE reform high on his list, according to one of President Trump’s top economic advisors. Meanwhile, speculation abounds as to whether there’s an administrative solution to GSE reform absent any legislative action. After some back and forth on the topic since the announcement of Mnuchin’s nomination his subsequent comments on the GSEs, economic advisor Gary Cohen said in national media outlets late last week that GSE reform is definitely a priority for Mnuchin. In fact, he said that it’s something Mnuchin’s spent a lot of time working on. “Once he gets approved and confirmed, Steve will be taking that on as one of this early priorities. So we definitely have some plans...
Fairholme Capital Management, in a new letter to clients, once again lays out its argument for investing in Fannie Mae and Freddie Mac stock, but also takes a subtle, but polite, swipe at those opposed to a “recap-and-release” plan for the GSEs. “Only the disingenuous would assert that recapitalization of these companies would take decades and come at taxpayers’ expense, as if retaining earnings precluded the ability of each company to raise equity from private investors,” the mutual fund manager writes. Fairholme also notes that it owns GSE junior preferred shares – as opposed to common – because “…the provisions of the preferred stock contracts that...
Uneconomic price competition coupled with Congressional discord are some of the concerns analysts have expressed about the Mortgage Bankers Association’s newly released plan for GSE reform. The MBA’s proposal recommends multiple privately owned guarantors, preferably more than two, to increase competition in the market. Fannie Mae and Freddie Mac would be the first two and the MBA suggests that new guarantors receive a charter to enhance competition. “The more market participants that compete, the better for consumers, the economy and the system,” said Rodrigo Lopez, MBA chairman. GSE Reform Principles and Guardrails also suggests that Congress sanction an “explicit government guarantee for eligible securities in order to entice domestic and foreign investors to keep buying...
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