The Treasury Department and Department of Housing and Urban Development have proposed broad changes that could affect all players in the system, from mortgage borrowers to lenders to securities investors.Treasury and FHFA should work to recapitalize Fannie and Freddie Ostensibly, the goal of any housing-finance reform would be to address one of the largest remaining legacies of the Great Recession: The conservatorship of Fannie Mae and Freddie Mac.
However, Treasury Secretary Steven Mnuchin told Fox Business Monday that the end of the net worth sweeps could come as soon as September, pending negotiations with FHFA. “We expect in the near term we’ll have an agreement where we will allow both Fannie Mae and Freddie Mac to retain their earnings, which will be a significant increase in capital and a step in the right direction to us ultimately raising third-party capital,” Mnuchin said.
The federal government’s guarantee should be funneled through Ginnie Mae One of the most notable changes the Trump administration has called for is Congress drafting legislation to create an explicit catastrophic backstop from the federal government for Fannie and Freddie. On the one hand, this could expand the capital available to lenders if they had more channels to tap for securitization. And that could mean additional loans being made. But it would also potentially increase the risk to the housing-finance system. And if it hobbled Fannie and Freddie, that could end up reducing the number of loans available.
Namely, the patch allowed Fannie and Freddie to buy loans where the borrower’s debt-to-income ratio exceeded 43%, the limit to achieve “qualified mortgage” status. The patch, Treasury said, gave Fannie and Freddie an advantage over lenders who intended to keep loans on their portfolios.But some have argued that the patch allowed for millions of mortgages to be made that wouldn’t have otherwise happened.
FHFA should re-evaluate whether Fannie and Freddie should offer cash-out refinancings, vacation home loans and more The Treasury Department proposed assessing the products and services Fannie and Freddie each offer in order to determine whether they are in line with their statutory missions.
I mean, they only crashed the economy, in a sane world we'd have shut them down .
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