In six weeks, Mel Watt will officially step down as director of the Federal Housing Finance Agency, a change that is ripe with ramifications for the secondary mortgage market, including speculation regarding lower loan limits for Fannie Mae and Freddie Mac.
A lot of pieces have fallen into place for the scheduled June 2019 launch of the single security in the to-be-announced market, but one that hasn’t is a greenlight from the organization that sets TBA rules: the Securities Industry and Financial Markets Association.
The proposed capital requirements for Fannie Mae and Freddie Mac aim for risk-based standards that will allow the government-sponsored enterprises – and future competitors – to earn an acceptable return while remaining strong enough to withstand severe economic downturns.
The Trump administration is reportedly eyeing Mark Calabria, who now serves as chief economist for Vice President Mike Pence, as the next director of the Federal Housing Finance Agency, a five-year post that holds tremendous power over the government-sponsored enterprises.
Single-family mortgage business slowed predictably at Fannie Mae and Freddie Mac last month, although there was surprising resilience in the refinance market. [Includes two data charts.]
The Federal Housing Finance Agency and the government-sponsored enterprises say they’re on track for the June launch of the single security, but industry groups still have several concerns about the pending seismic shift in how Fannie Mae and Freddie Mac issue single-family mortgage-backed securities.
With the final rollout scheduled for June, FHFA, the GSEs, and Common Securitization Solutions are scrambling to make sure participants in the to-be-announced MBS market are ready for the big changes ahead.
Increasingly, it looks as though Mark Calabria, chief economist to Vice President Mike Pence, is the leading candidate to head the Federal Housing Finance Agency once Mel Watt’s term expires in January.
Fannie Mae and Freddie Mac say they support the Federal Housing Finance Agency’s proposal to include a leverage ratio on their future capital requirements.
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