Mnuchin’s top housing advisor says GSE charters should be removed

Craig Phillips: Trump administration working to end GSE conservatorship

Craig Phillips, Department of the Treasury Secretary Steven Mnuchin’s top housing advisor, told the crowd at the Mortgage Bankers Association 2018 Annual Conference in Washington, D.C., on Monday that the Trump administration is working to end the conservatorship of Fannie Mae and Freddie Mac.

Phillips, whose official title is counselor to the Secretary, also said for the first time that the Treasury believes the government-sponsored enterprises’ federal charter needs to be removed.

“The administration advocates ending the conservatorship of Fannie Mae and Freddie Mac and returning them to private ownership,” Phillips said Monday. “Their charters should be removed from statute and their operations should be overseen by the primary regulator that has the authority to approve additional guarantors to introduce competition into the secondary mortgage market.”

The part about the Trump administration working towards ending the GSEs’ 10-year stay in conservatorship isn’t new.

Back in June, the Trump administration unveiled a sweeping proposal to overhaul the federal government. Included in that proposal was a section about privatizing the government-sponsored enterprises and ending conservatorship.

That proposal came from the Office of Budget and Management, and also included a section about removing the GSEs’ charter, but Phillips made it clear that that is the way that the Treasury feels too.

“Guarantors should have access to an explicit federal guarantee for MBS (mortgage-backed securities) that they issue which is on budget and fully paid for, designed for use only in exigent circumstances and designed and overseen in a manner that protects the interests of taxpayers by their primary regulator,” Phillips continued.

“We’d like to see a more level playing field between the private and federally backed sector, measured by the effective market share and lending volume, which can be achieved by careful review of the participating guarantors risk profile, product focus, pricing, and alignment of subsidies,” he added.

Phillips also said that the housing finance reform is a “very important” goal of Mnuchin, adding that Treasury’s central position is that reform is desperately needed.

Phillips also gave a brief update about the GSE single security, which is scheduled to be fully rolled out next year.

Phillips said that the Treasury, Federal Housing Finance Agency, and the GSEs are spending “a lot” of time on the single mortgage-backed security that will be issued by both Fannie Mae and Freddie Mac.

‘We think this will reduce costs to borrowers, especially on Freddie Mac securities,” Phillips said. According to Phillips, “word is that most systems are go for a launch in June 2019,” in line with the scheduled launch.

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