Let Valuation Tech Help Improve Your Collateral Valuation

Join this webinar to learn how technological advancements in valuation provide solutions to help lenders and servicers deliver more comprehensive offerings to their clients.

Talking proptech with FinLedger Director Holden Page

In this episode, Page discusses the hottest topics coming across FinLedger’s news desk. Topics include: the online banking market, what’s happening in the proptech space and recent private market deals.

engage.marketing 2021

We brought together the smartest minds in purchase marketing to share the insights, tactics and strategies that set the leaders apart. Watch the sessions on-demand now!

How Rocket Pro TPO continues to give its broker partners the upper hand

To remain competitive and create a better experience in this purchase environment, brokers need one thing above all: Speed. And there’s one lending partner that has the solutions and resources to give LOs just that.


Fitch: Fannie Mae, Freddie Mac reform may be put on back-burner

Complexity of issue, differing interests may further delay GSE reform

While the Democrats in the Senate fight the confirmation of Steve Mnuchin, the Trump administration’s choice to lead the Department of the Treasury, the fate of Fannie Mae and Freddie Mac continues to reside in suspended animation.

But how much longer will the government-sponsored enterprises float in the conservatorship ether?

According to a new report from Fitch Ratings, those waiting for comprehensive GSE reform may have to wait a little longer.

Mnuchin sent Fannie and Freddie’s stock soaring back in November, when he said that “getting Fannie and Freddie out of government ownership” is one of the Trump administration’s top 10 priorities.

While Mnuchin’s comments made it clear that the Trump administration views housing finance reform as a high priority, the question is how the Trump administration would go about reforming the complex world of housing finance.

Mnuchin’s comments about removing Fannie and Freddie from conservatorship led some to wonder whether he supported “recap and release,” which would involve Fannie and Freddie rebuilding their dwindling capital buffers, then being released from their current state of conservatorship to continue to operate as they did before they were taken over by the government.

But Mnuchin later threw a bit of cold water on the idea that Fannie and Freddie would simply be cut loose from government control in short order.

“My comments were never that there should be recap and release. For long periods of time, Fannie and Freddie were well run and did not create risk to the government. I believe there are very important entities,” Mnuchin said.

“We need housing reform,” Mnuchin said. “We shouldn’t leave Fannie and Freddie alone for the next four or eight years without reform.”

While Mnuchin’s statements showed that there might actually be a light at the end of the conservatorship tunnel, Fitch’s analysts suggest that the mechanics of actually reforming Fannie and Freddie make that light at the end of the tunnel a little further away than one might think.

“The future of Fannie Mae and Freddie Mac remains among the thorniest of public policy questions,” Fitch’s analysts write. “There is no consensus on the future of Fannie Mae and Freddie Mac, a primary reason why they have remained in their post-crisis conservatorship for so long.”

As Fitch’s analysts note, there are several “key” questions that need to be answered before GSE reform can truly move forward, including:

  • Should the Federal government (continue to) have a role in supporting private home ownership?
  • What form should those subsidies (continue to) take?

And as the analysts add, there are quite a few interested parties that have a stake in housing finance reform questions.

“In addition to the GSEs, the federal government supports housing through other means, such as the personal income tax deduction for mortgage interest, Ginnie Mae, Federal Home Loan Banks and affordable housing goals through the Federal Housing Administration, and the Department of Housing and Urban Development and Department of Veterans Affairs,” Fitch’s analysts write.

“Consequently, the list of vested interests is long and powerful, namely current or prospective home owners, large and small banks, holders of Fannie Mae and Freddie Mac equity and debt securities, mortgage brokers, realtors, homebuilders, affordable housing advocates, and among other players,” the analysts continue.

And because of the impact that the GSEs have on the mortgage market, both among consumers and market participants,” any change to the GSEs’ role would have a “significant” impact on the nation’s housing system.

“Fannie Mae and Freddie Mac support the 30- year fixed-rate mortgage, which is a unique and prominent feature of the U.S. mortgage market,” Fitch’s analysts write.

“Banks are able to underwrite and sell their qualifying 30-year fixed-rate loans to the GSEs, allowing them to transfer the interest rate risk of such loans to the GSEs,” the analysts continue. “Currently, Ginnie Mae does not have sufficient capacity or execution ability to absorb their mortgage purchase volumes.”

Due to those factors, Fitch’s analysts state that they don’t expect GSE reform to happen as quickly as other Trump administration moves, namely deregulation.

“Therefore, while addressing the Fannie Mae and Freddie Mac question may feature in the new administration’s agenda, its complexities and the differing desired outcomes suggest it may become a secondary agenda item, so as not to delay passage of several of the aforementioned deregulation provisions,” the analysts conclude.

Most Popular Articles

Will we ever see a “normal” housing market again?

The question on everyone’s minds: When will this hot housing market cool down? Arch MI investigates this and more in its Spring Housing and Mortgage Market Review.

Jun 22, 2021 By

Latest Articles

TitleWave launches Colorado branch

TitleWave Real Estate Solutions of Florida has announced a new location in Colorado, as well as the launch of its title and search report technology.

Jun 24, 2021 By
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please