{"id":1361,"date":"2013-06-27T09:21:01","date_gmt":"2013-06-27T13:21:01","guid":{"rendered":"http:\/\/dankrell.com\/blog\/?p=1361"},"modified":"2019-06-29T09:23:42","modified_gmt":"2019-06-29T13:23:42","slug":"saying-goodbye-to-fannie-and-freddie","status":"publish","type":"post","link":"https:\/\/dankrell.com\/blog\/2013\/06\/27\/saying-goodbye-to-fannie-and-freddie\/","title":{"rendered":"Saying goodbye to Fannie and Freddie"},"content":{"rendered":"\n

\"homes\"<\/a>A recent Housingwire report (housingwire.com; Senators launch bill to boost secondary mortgage market<\/a><\/i>) described a bipartisan effort to modernize the government sponsored housing finance entities.\u00a0 The Senators\u2019 plan will wind down Fannie Mae and Freddie Mac and replace them with one government \u201cguarantor,\u201d which is to be called the Federal Mortgage Insurance Corp<\/i>.<\/figure><\/h3>\n\n\n\n

This bipartisan effort is the latest in a succession of moves to repair and improve the nation\u2019s housing finance markets, which began with the Housing and Economic Recovery Act of 2008 <\/a>(HERA).  HERA was comprehensive legislation that was intended to address issues that caused or resulted from the financial crisis.  Besides focusing on modernizing FHA, HERA also set its sights on Fannie and Freddie by creating the Federal Housing Finance Agency (FHFA) to oversee the Government Sponsored Entities (GSE) and possibly reducing Fannie and Freddie\u2019s role in the housing industry.<\/h3>\n\n\n\n

Although FHFA acted as \u201cconservator\u201d<\/a> for Fannie and Freddie because of capitalization problems, poor financial performance and deteriorating market conditions; the role was intended to be temporary.  The oversight agency provided guidance in increasing liquidity so Fannie and Freddie would become streamlined and profitable.  Since FHFA took control, experts have speculated on the fates of the mortgage giants; some articulated an eventual shut down of Fannie and Freddie, while others described a modified role in housing finance.<\/p>\n\n\n\n

For those not plugged into the industry, the replacement of the GSEs might be a surprise.\u00a0 However, Housingwire reported in April (FHFA gears up for single GSE securitization platform<\/a><\/i>) of FHFA\u2019s initial plan to reduce Fannie and Freddie\u2019s mortgage backed securities holdings.\u00a0 The idea was to create a new single entity to facilitate the reduction of the GSEs secondary market involvement so as to increase private capital participation.<\/p>\n\n\n\n

A June 25<\/a>th<\/a><\/sup> press release<\/a> quoted Senator Bob Corker (R-TN) (corker.senate.gov) as saying, \u201cFive years after the financial crisis, it is past time for us to modernize our unstable system of housing finance\u201d… \u201cThe framework we\u2019re presenting here will protect taxpayers while maintaining market liquidity, and is the best opportunity we\u2019ll have to finally move beyond the failed GSE model of private gains and public losses.\u201d<\/p>\n\n\n\n

Because there has not been much reform to housing finance since the financial crisis, the proposed legislation was crafted in response to the consequences of a $188 million Fannie and Freddie bailout.   The bailout resulted in a mortgage market where \u201cnearly every loan made in America today comes with a full government guarantee<\/i>,\u201d and that private capital has all but disappeared from the mortgage secondary markets.<\/p>\n\n\n\n

Co-sponsor Senator Mark Warner (D-VA) was quoted to say, \u201c\u201cHousing finance is the last piece of unfinished business remaining after the 2008 economic meltdown\u201d \u2026\u201cWe have designed thoughtful reforms that will protect taxpayers from future downturns while responsibly preserving the availability of the 30-year fixed-rate mortgage for homebuyers. We believe the housing market is ready for reforms like this, and that the private sector has been waiting for new rules of the road.\u201d<\/p>\n\n\n\n

Besides having the intention of protecting taxpayers from future bailouts, the Housing Finance Reform and Taxpayer Protection Act (S. 1217) is intended (among other purposes) to \u201cwind down\u201d within five years the FHFA, Fannie Mae, and Freddie Mac; \u201censure that lending institutions of all sizes have access to the secondary markets;\u201d and \u201ctransfer duties and functions\u201d to a new entity \u2013 the Federal Mortgage Insurance Corporation (FMIC).<\/p>\n\n\n\n

\"Protected<\/a><\/figure>\n\n\n\n

By Dan Krell
Copyright \u00a9 2013 <\/p>\n\n\n\n

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws. <\/p>\n","protected":false},"excerpt":{"rendered":"

A recent Housingwire report (housingwire.com; Senators launch bill to boost secondary mortgage market) described a bipartisan effort to modernize the government sponsored housing finance entities.\u00a0 The Senators\u2019 plan will wind down Fannie Mae and Freddie Mac and replace them with one government \u201cguarantor,\u201d which is to be called the Federal Mortgage Insurance Corp. This bipartisan … <\/p>\n

Continue reading “Saying goodbye to Fannie and Freddie”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[101,681,166,102,155,682],"tags":[846,998,881,847,595,999],"class_list":["post-1361","post","type-post","status-publish","format-standard","hentry","category-fannie-mae","category-federal-mortgage-insurance-corporation","category-fhfa","category-freddie-mac","category-housing-and-economic-recovery-act","category-housing-finance-reform-and-taxpayer-protection-act","tag-fannie-mae","tag-federal-mortgage-insurance-corporation","tag-fhfa","tag-freddie-mac","tag-housing-and-economic-recovery-act-of-2008","tag-housing-finance-reform-and-taxpayer-protection-act"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p1VZLf-lX","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/1361","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/comments?post=1361"}],"version-history":[{"count":3,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/1361\/revisions"}],"predecessor-version":[{"id":5051,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/1361\/revisions\/5051"}],"wp:attachment":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/media?parent=1361"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/categories?post=1361"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/tags?post=1361"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}