The primary role of Fannie Mae and Freddie Mac is to issue mortgage bonds.
We seem to have forgotten that.
Yes, the government-sponsored enterprises became used as tools of housing policy, but let's not confuse that with mortgage finance.
But confused I think we are.
The reason I bring this up is that after reviewing what little information is available on the Johnson-Crapo bill coming soon in the Senate, the most glaring omission is information of how the mortgage bond markets will operate after winding down the government-sponsored enterprises.
What hardly gets a mention, and to me is the most glaring, is how the To-Be-Announced market will function in the absence of the two bond dealers that fill this highly liquid $10 trillion space.
What's happening here is a reinforcement of the need to stop using secondary mortgage market issuers as tools for housing policy.
This is likely why the Johnson-Crapo bill calls for an elimination of affordable housing goals. If this works, the multifamily asset class introduction into risk-sharing deals would increase financing for renters.
Compass Point earlier gave the Johnson-Crapo bill a less than 5% shot of becoming law.
Rep. Maxine Waters applauded the bipartisan support, but also give it an even lower chance.
"Without a reasonable proposal that can be supported by a broader coalition of the House, housing finance reform is going nowhere this year," Waters said in an email.
It's just as well; TBA investors still need better answers.