Here’s how TRID is changing the mortgage industry

Here’s how TRID is changing the mortgage industry

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There is no entity in the private mortgage market that could assume the large volume of mortgage business carried by Fannie Mae and Freddie Mac, U.S. Rep. Carolyn Maloney, D-NY, argued during a U.S. House Financial Services Committee hearing.

Rep. Maloney suggested without the GSEs, borrowers could also lose access to the popular, 30-year, fixed-rate mortgage.

During a discussion entitled "Fannie Mae and Freddie Mac: How Government Housing Policy Failed Homeowners and Taxpayers and Led to the Financial Crisis," Maloney noted that both government-sponsored enterprises maintained their value of mortgage securities and did not significantly contribute to the financial and economic crisis.

Professor Susan Wachter from the University of Pennsylvania's Wharton School agreed, saying there is currently no entity or institution that could support the 30-year fixed rate mortgage in today's market.

"We had a crisis which occurred because commercial banks and SNL were putting into portfolio the fixed-rate mortgages and it will not be sustainable going forward," Wachter said.

If the market were to only rely on adjustable-rate mortgages, this would put mortgage borrowers into payment shock, Wachter suggested.

Instead of eliminating both Fannie Mae and Freddie Mac from the market, there needs to be a change back to both GSEs original intention, lawmakers argued.

"There is no possibility for the trillions of dollars supported by Fannie Mae and Freddie Mac to be taken over by an individual entity or banking institutions and there is no likelihood of any other entity stepping forward," Wachter told the panel.

Although Democrats and Republicans held opposing views during the hearing, a consensus was reached among lawmakers that taxpayers and homeowners should never have to fail the impact of a GSE bailout again.

Rep. Randy Neugebauer, R-TX, noted that the ones hit hardest during the crisis were homeowners and going forward there needs to be more protection of the American dream.

"When we have fiscal policy that creates bubbles and those bubbles burst, we need to make sure that history does not repeat itself," he said.

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