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Volume 17 - Number 23

November 17, 2017

Tax Reform Plan Puts GSEs a Step Closer to Potential Treasury Draw

With the Senate and the House having both recently released their tax proposals, it’s the House plan to cut corporate taxes in 2018 that would impact the GSEs by threatening their deferred tax assets. A corporate tax cut would likely force Fannie Mae and Freddie Mac to take draws from the U.S. Treasury. This is especially true in light of the fact that by Jan. 1, 2018, neither GSE will be allowed to hold a capital buffer to absorb any losses. A cut to corporate taxes means a write down of some Fannie/Freddie DTAs, including mortgage-related assets, allowances for bad loans, derivatives-related basis differences and deferred fees, which are all currently held at a higher tax rate.

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Who "owns" the mortgage customer that’s brought to a wholesale lender through a loan broker?

The broker. It’s his/her client.


The wholesale/table funder. They’re taking the financial risk.


The broker, but only for the first year. After that, the borrower is fair game.


Hard to answer. It’s a complicated issue.