Republicans are poised to introduce a bill that would codify reforms of the GSEs that have been completed administratively. The bill would also establish a utility model framework for Fannie Mae and Freddie Mac and alter how calculations are made to annual changes in loan limits.
Changes to Common Securitization Solutions, including being renamed U.S. Financial Technology, appear to set the company up to serve additional secondary mortgage market participants.
President Trump attempted to mollify concerns about the post-conservatorship guarantee of GSE MBS, but questions remain about the regulatory treatment of those securities and the TBA market.
Trump’s nominee to head FHFA didn’t do anything to embarrass himself at his confirmation hearing this week, but he also didn’t demonstrate a deep understanding of housing finance.
Treasury Secretary Bessent’s cautious remarks about the prospect for GSE reform heighten industry skepticism about the release of Fannie Mae and Freddie Mac from conservatorship.
Obstacles like how to deal with the implicit guarantee and excessively high capital requirements make it unlikely that the GSEs will exit conservatorship under Trump, though the chances are higher than before his election.
The debate over how to end the conservatorships of Fannie Mae and Freddie Mac hinges on whether rating services would downgrade the GSEs if they exit without an explicit government guarantee.
Critics argue that, if Fannie Mae and Freddie Mac are released from conservatorship without an explicit government guarantee, MBS investors will demand wider spreads to cover the added credit risk.
A panel of mortgage industry veterans concluded that the best scenario MBS investors can hope for in the upcoming election is that neither side wins a clean sweep of the presidency and Congress.
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