The Mortgage Bankers Association (MBA) is calling for secondary mortgage market reform with the goal of replacing the conservatorship of Fannie Mae and Freddie Mac (GSEs) with a new foundation for the secondary mortgage market.
In a paper titled “GSE Reform Principles and Guardrails,” developed by MBA’s Task Force for a Future Secondary Mortgage Market, the MBA outlines the principles, key components, and protections that should be incorporated in a reformed secondary mortgage market.
“As a mid-size lender, it is critical to me that this paper addresses several key issues, namely that it ensures equal market access for lenders of all sizes and business models, and that it maintains a deep, liquid market for long-term financing options,” Hank Cunningham, task force member and president of First Mortgage Company, LLC, said.
The task force looked at a variety of potential models and concluded that a solution should encourage multiple guarantors, organized as privately-owned utilities with a regulated rate of return. Guarantors could purchase from a newly created insurance fund – an explicit federal guarantee on a defined class of eligible securities. The entities would provide credit to the conventional single family and multifamily mortgage market and access to lenders of all sizes and business models. The entities would also be responsible for executing an affordable housing strategy to ensure broad access to credit.
“The U.S. mortgage market requires global capital in order to maintain adequate liquidity through all economic cycles. International and institutional investors will only fill that role if there is an explicit government guarantee on the securities, something that can only be obtained by congressional action,” Rodrigo Lopez CMB, executive chairman of NorthMarq Capital and chairman of MBA, said.
MBA will elaborate on these concepts in a full paper to be released in April.
“This paper was developed with an eye toward serving the broadest range of housing options, and thus includes both single- and multifamily approaches for homeowners and renters,” Mike May, task force member and BPC executive managing director-vice chairman CCRE National Head of Multifamily, said.