Reforming the housing-finance system under the plan from Sen. Bob Corker, R-TN, includes having at least a handful of guarantors, winding down the GSEs and establishing a mortgage insurance fund with private capital, according to a leaked draft making the rounds this week. The 80-page document seeks to promote competition in the marketplace by having five or six guarantors of conventional mortgage-backed securities, with none of them getting more than 20 percent to 25 percent of the market. Those new guarantors would be expected to launch within two years. Section 809 of the legislation spells out that “as promptly as practicable” the FHFA can greenlight Fannie Mae and Freddie Mac to “sell or transfer” their assets.
In the event that Congress can’t come to an agreement on fixing Fannie Mae and Freddie Mac, Treasury Secretary Steve Mnuchin said the department can take matters into its own hands. But he would rather leave it up to the lawmakers. “There are certain administrative options that we have,” he said, adding, “These entities are very complicated, and I would just say my strong preference would be to work with Congress on a bipartisan basis to reach a long-term solution.” Mnuchin reaffirmed his commitment to reforming the housing-finance system and support for the 30-year fixed-rate mortgage while testifying at a Committee on Banking, Housing, and Urban Affairs hearing Tuesday morning.
Fannie Mae and Freddie Mac saw declines in the flow of purchase and refinance loans into single-family mortgage-backed securities last month, starting 2018 on a sour note. The two GSEs produced a total of $67.48 billion of new single-family MBS in January, according to a new Inside The GSEs analysis and ranking. That was down 8.8 percent from the previous month and off 26.4 percent from January 2017. It was the GSEs’ weakest monthly output since May 2017, and it would have been worse had Fannie not come up with $4.69 billion in mortgage securities backed by modified loans. Including those mod-backed deals, Fannie issuance was up 5.0 percent from December. Without them, the company’s new MBS issuance fell 5.7 percent in January.
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