WASHINGTON (3/6/13)--The Federal Housing Finance Agency will begin to build a new securitization infrastructure, including a joint venture to handle mortgage securitization, and contract Fannie Mae and Freddie Mac's dominant presence in the marketplace while simplifying and shrinking some of those firms' operations, FHFA Acting Director Edward DeMarco said.
DeMarco made his remarks before the National Association for Business Economics annual conference this week.
The Credit Union National Association has repeatedly encouraged the FHFA to ensure that any changes to secondary mortgage market structure allow credit unions and other small issuers to maintain full and unrestricted access to that market. CUNA has also highlighted the importance of preserving 30-year, fixed-rate mortgages and ensuring that the secondary market is strong enough to weather economic adversity.
The new structure would be separate from Fannie Mae and Freddie Mac, and will be headed by a CEO and Chairman that are independent from those two government-sponsored entities. The new entity will also accept input from industry participants, DeMarco said. Fannie and Freddie will own the new securitzation business at first, but "the overarching goal is to create something of value that could either be sold or used by policy makers as a foundational element of the mortgage market of the future," DeMarco added.
During this secondary mortgage market restructuring, Fannie and Freddie will maintain their current foreclosure prevention activities and continue to provide credit availability for new and refinanced mortgages, DeMarco said. The steps outlined "should help to set the stage for whatever transition policy makers set forth," he noted.
The U.S. Treasury last summer announced that the winding down of mortgage investment portfolios held by Fannie and Freddie will be accelerated to an annual rate of 15%. The Obama administration is also considering a range of options for mortgage market reform, including almost completely privatizing the housing finance system, limiting the government's intervention in the mortgage market to times of financial distress, and using a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages. Congressional hearings on mortgage market reforms have also been held.
For more on DeMarco's recent remarks, use the resource link.