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Federal housing leaders seek faster return of private capital

 

The leaders of the nation's federal housing agencies want a faster, not slower, transition to a housing finance system supported by private capital.

That's the message the heads of Fannie Mae, Freddie Mac, the Department of Housing and Urban Development, the Federal Home Loan Bank of Chicago and Ginnie Mae communicated when speaking at the opening session of the Mortgage Bankers Association's 99th Annual Convention & Expo in Chicago.

In fact, Donald Layton, CEO of Freddie Mac, said the consensus from inside Freddie is that staffers would like to see the conservatorship of the government-sponsored enterprises no longer in effect four years from now.

Other members of the panel agreed, but challenges remain as the Federal Housing Finance Agency and the GSEs it regulates take a step-by-step approach in piecing together a securitization model that can eventually draw private capital back into the mortgage market.

Such a system requires checks and balances, transparency, streamlined contracts and a dose of patience since it will be a long journey from today — where government housing agencies are keeping the market afloat — and tomorrow where private capital is expected to drive a substantial portion of the mortgage finance system.

"While government should play a key role (in housing finance), the ultimate question is how much government is necessary," said E.J. Burke, the MBA's vice chairman.

"Earlier this year, the FHFA released its strategic plan for the future of Fannie Mae and Freddie Mac. The transition must not disrupt our fragile mortgage and mortgage securities markets," Burke told the crowd.

Fannie Mae CEO Timothy Mayopoulos noted his agency is already a different firm today when compared to pre-crisis times.

"The people of Fannie Mae today are part of the solution, they are not part of the problem," he asserted. "The company is no longer run for the profit of shareholders."

Instead, decisions are made with the interest of taxpayers taking center stage, he said. 

Despite hopes for private capital in the market, Mayopoulos said "more than four years after the onset of the financial crisis, we see little evidence of private capital to meet the market's needs."

Some of the factors holding private capital back include capacity concerns, repurchase risk, regulatory issues and a reluctance among lenders to extend credit, the Fannie Mae CEO said.

Still, the GSEs are working on a new mortgage securitization model, hoping it will provide the structure for private-label mortgage activity in the future.

Carol Galante, acting assistant secretary for housing and Federal Housing Administraion commissioner, said over the next year, her agency will be focused on providing continued access to credit, building the FHA insurance fund, overseeing its legacy business and deepening the agency's risk management capabilities and analytics. 

HousingWire's Kerri Panchuk is attending the MBA Conference. Follow her on Twitter for additional conference updates.

kpanchuk@housingwire.com

 

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