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Breaking down the three GSE reform measures

SFIG compares Johnson-Crapo, Corker-Warner and PATH

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The Structured Finance Industry Group has put together a side-by-side comparison of three major GSE reform packages currently floating around Capitol Hill.

SFIG, the trade industry group that supports the broader structured finance and securitization market, isn’t endorsing any one of the plans, but hopes to work with legislators on whichever reform measure ends up coming to fruition.

“SFIG applauds the bipartisan efforts of the Senate Banking Committee to establish a viable housing finance system that relies on a stable private mortgage market while responsibly winding down the government’s role in the market,” said Richard Johns, SFIG’s executive director. “Their efforts will maintain the momentum for housing finance reform begun by Financial Services Chairman Jeb Hensarling, R-Texas, in the House, and by Senators Bob Corker, R-Tenn., and Mark Warner, D-Va., in the Senate, whose legislation formed the foundation for the Chairman and Ranking Member’s agreement.”

Currently there are three major measures aimed at reforming the housing industry and the government-sponsored enterprises Fannie Mae and Freddie Mac. There are two senate versions – Corker-Warner and Johnson-Crapo – and one House version, the PATH Act.

Few in the industry or in Washington expect any real movement on GSE reform before the 2014 mid-term elections in November.

The GSEs currently back 90% of mortgages, and the current structure is keeping private label capital out of the market.

 “We look forward to continuing our role as a constructive partner in the ongoing legislative discussion,” Johns said.

SFIG created the following side-by-side comparison of the details of the three GSE reform proposals, without endorsing any single one of them.

The full report from SFIG can be read or downloaded here.

SFIG says it believes it is critical that any housing finance reform provide for the following:

  • Preservation and growth of the TBA market, which is the most efficient mechanism to enable consumers to “lock-in” interest rates on a forward basis and help minimize the cost of borrowing;
  • Preservation of the 30-year fixed-rate mortgage;
  • Creation of a common TBA security to foster a deep and liquid housing market;
  • Implementation of a securitization platform;
  • Preservation of the liquidity of legacy securities; without creating a bifurcated market; and
  • A deliberate and orderly transition from the existing Government-Sponsored Enterprises.

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