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Freddie CEO says private capital infusion contingent on higher guarantee fees

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Some type of government backstop to shore up liquidity in times of crisis is needed to get private capital back into the mortgage finance market, according to Freddie Mac Chief Executive Officer Charles 'Ed' Haldeman. Speaking at HousingWire's REthink Symposium Tuesday morning, Haldeman also said principal writedowns don't make sense for the government-sponsored enterprise. Haldeman said he will leave housing policy to policymakers, but he's leaning toward the third GSE-reform option proposed by the Treasury Department in its February white paper on how to revamp Freddie Mac and Fannie Mae. "While I am a free-market capitalistic kind of person, I do think there is some limited role we should have for the government in the long-term," Haldeman said. In addition, Haldeman said the preservation of some type of government backstop is beneficial for helping the market through "periods of hardship like now" by providing liquidity. "Secondly, if the government is the ultimate backstop for MBS securities, we will be able to secure more capital globally and that would result in a savings on mortgage rates," Haldeman said. "The struggle is to get those two advantages and to still advocate for it to be largely supported by free market capital." However, Haldeman doubts private capital will return until guarantee fees become a larger part of the equation. "I think our guarantee fee has to go up in a material way before we are going to get any private capital to come in," he said. "There has to be a meaningful G-fee increase." On principal writedowns, Haldeman said the benefit to Freddie Mac would be quite small because its delinquency rate, at 3.6% in the first quarter, is already quite low and far below the national rate of 8.6%. "There may be some places where it might make sense … it doesn't make sense for our book," he said. Write to: Kerri Panchuk.

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