With government pressing for ways to wind down Fannie Mae and Freddie Mac, potential replacements seem to be insufficient to fill the void. At a meeting of the American Securitization Forum, a panel explored the topic as they attempted to discuss "life without the GSE's."
Reported by HousingWire, the panel explored potential changes to the housing finance market including development of a covered bond market currently being explored by a Congressional committee, to greater presence of private investment capital. However, these potential solutions expect to only be able to support a small portion of the market.
With Fannie Mae and Freddie Mac currently propped up by government conservatorship and reforms mandated by the Dodd-Frank Act expected to find ways to reduce the government's footprint in the housing finance market, there is little consensus on the best path to accomplish these goals.
The moderator of the panel, Christopher DiAngelo, partner at Katten Muchin Rosenman suggested that since the largest banks, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo currently hold 70% of the private mortgage origination market, they should be pressed to take market share from the GSE's. It seems unlikely that the largest banks would be willing to become the primary source of capital for the housing finance sector.
Most experts expect that the development of any replacement options to take years, and many doubt the ability of the government to successfully withdraw the government sponsored entities.