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FHFA Submits Plan Envisioning GSE Drawdown, 'Market Of The Future'

mortgageorb.comFeb 22, 2012

The Federal Housing Finance Agency (FHFA) yesterday presented a plan to Congress that emphasizes the development of a new, unified secondary marketing platform that will accommodate private investors and minimize - or eliminate - the roles of government-sponsored enterprises (GSEs) Freddie Mac and Fannie Mae.

However, it appears that the GSEs will remain under government conservatorship for the forseeable future, with acting FHFA director Edward DeMarco noting that there is "no near-term resolution in sight."

"It is time to update and extend the goals and directions of the conservatorships," DeMarco wrote in a letter to lawmakers. "FHFA is contemplating next steps to build an infrastructure for the secondary mortgage market that is consistent with existing policy proposals and will support any outcome of the leading legislative proposals."

The FHFA echoed the mortgage banking industry's dominant sentiment in the title of its plan: "The Next Chapter in a Story that Needs an Ending." Indeed, groups such as the Mortgage Bankers Association (MBA) and National Association of Federal Credit Unions (NAFCU) chimed in, expressing their positions about where the FHFA is steering the GSEs.

"Uncertainty, wherever it exists, must be removed and a clear path forward must be laid out, in order for the housing market in this country to be strong and vibrant," said David Stevens, president and CEO of the MBA. "This proposal that FHFA is putting forth shows a strong commitment to doing just that."

Fred Becker Jr., NAFCU's president and CEO, was less complimentary, noting that the new plan "raises more questions than it answers in the ongoing debate of GSE reform."

"Whether a government guarantee will be part of the future of any reform plan is a key issue for our members, and one FHFA has not answered," he said. "The impact of a single securitization platform, the role of pricing and the degree of private-market control in the secondary market are all areas where the fine print determines whether the outcome will be positive or negative."

The FHFA's new plan supports a continuation of the GSEs' loss mitigation efforts and overall focus on foreclosure prevention. The agency highlighted Fannie's and Freddie's accomplishments in this arena, including the completion of more than 1 million loan modifications since September 2008.

But perhaps more compelling for the mortgage finance industry is what the FHFA has in mind for stepping into new territory. Although the future of the secondary market is far from certain, the FHFA's latest plan advocates a shift away from GSE dominance.

The trouble, of course, is getting to that place.

"No private sector infrastructure exists today that is capable of securitizing the $100 billion per month in new mortgages being originated," the FHFA remarks in its plan. "Simply shutting down the enterprises would drive up interest rates and limit mortgage availability."

The FHFA envisions the "mortgage market of the future" to possibly include a centralized securitization platform backed by national standards for mortgage securitization, a standardized pooling and servicing agreement, data transparency for investors, unambiguous servicing requirements, and a competitive servicing compensation structure. In tandem, credit risk will slowly shift from Fannie and Freddie to private investors.

"Achieving these strategic goals will fulfill the legal requirements Congress assigned FHFA as conservator and also prepare the foundation for a new, stronger housing finance system," the plan states. "That future may not include Fannie Mae and Freddie Mac, at least as they are known today."

Complicating any progress that the FHFA could make is the non-trivial reality that alterations to Fannie's and Freddie's operations and overall missions will require congressional action - action that is not likely to be taken anytime soon, the FHFA says.

Back to February 2012 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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