Government-sponsored enterprises are expected to slide from their top spot in the mortgage-guarantee space as the securitization market stages a comeback, the Congressional Budget Office said.

The CBO’s projection reflects the scheduled expiration in 2021 of a fee on mortgages guaranteed by Fannie Mae and Freddie Mac.

By 2012, more than 95% of new mortgages were guaranteed by federal agencies and the GSEs. 

However, that percentage will drastically drop in the coming years “under current law, as the effects of financial crisis continue to subside and the private mortgage market recovers,” said Susanne Mehlman, analyst in the CBO’s budget analysis division.

The estimation by the CBO is a bold one, due to uncertainty of what the future system will look like in the securitization sector. 

While the goal is to eventually shrink Fannie Mae and Freddie Mac’s presence in the housing market, no current structure exists to take over the agency-dominated market.

Recently, the Federal Housing Finance Agency outlined a plan to create a new business entity between the GSEs, which falls in line with the ongoing push for a single-securitization platform.

“We are designing this to be flexible so that the long-term ownership structure can be adjusted to meet the goals and direction that policymakers may set forth for housing finance reform,” said Ed DeMarco, current acting director of the FHFA.

Still, until the new private capital structure comes into formation, the total volume of residential mortgages will continue to be originated by federal agencies and the government-sponsored enterprises. 

cmlynski@housingwire.com

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