Former Presidents of Ginnie Mae, Robert Couch and Joseph Murin have submitted suggestions to lawmakers regarding the future structure of Government Sponsored Entities (GSEs), Fannie Mae and Freddie Mac.

HousingWire reports that in a letter submitted to Republican lawmakers, Senator Richard Shelby (AL), Rep. Spencer Bachus (AL) and Rep. Scott Garrett (NJ), the former presidents suggest that the Ginnie Mae model is the best way to maintain a steady availability of mortgage credit through all economic conditions while protecting taxpayers from undue risk.

The letter suggested that the best solution would be to remove the federal government completely from housing finance market, but the existing private financial system would not be able to continue to support the long-term housing finance market.

Accordingly, they suggested that guarantees be available only on securities backed by the safest loan and for guarantee pricing to be increased to account for a potential 20% to 25% drop in home prices.  This would amount to an increase over the guarantee fees that currently cover a 10% decline.  A reformed system should also include a recoupment provision that would require other firms to repay taxpayers in the event of catastrophe.

Creating a reliable market for long-term mortgage financing, the two wrote, dictates a model similar to Ginnie Mae that provides a limited government guarantee and pricing to ensure that mortgage credit continues to be available but taxpayers are appropriately shielded from risk.