NMP - July 2018 - 14

FLASH y JULY 2018 y NMP NEWSFLASH y JULY 2018 y NMP NEWSFLASH y JULY 2018 y NMP N

Trump Administration Offers
GSE Privatization Plan

JULY 2018 n National Mortgage Professional Magazine n

NationalMortgageProfessional.com

14

With the 10th anniversary of the
federal conservatorship of Fannie
Mae and Freddie Mac
approaching, the Trump
Administration has addressed the
future of the governmentsponsored enterprises (GSESs)
by recommending spinning them
into private companies.
As part of a 132-page proposal
called "Reform Federal Role in
Mortgage Finance," the
Administration addressed the
question of the conservatorship
by offering a proposal that would
"remove the federal charter from
statute and fully privatize the
GSEs." The proposal called for a
to-be-determined "federal entity
with secondary mortgage market
experience [that] would be
charged with regulatory oversight
of the fully privatized GSEs, have
the authority to approve
guarantors, and develop a
regulatory environment that is
conducive to developing
competition amongst new private
guarantors and the incumbent
GSEs, ensuring they would all be
adequately capitalized and
competing on a level playing
field."
The proposal also stated that
the regulator in charge of the
privatized GSEs "would also
ensure fair access to the
secondary market for all market

participants, including community
financial institutions and small
lenders." The proposal also
envisioned how "guarantors
would have access to an explicit
guarantee on the MBS that they
issue that is only exposed in
limited, exigent circumstances,"
adding that "taxpayers would be
protected by virtue of the capital
requirements imposed on the
guarantors, maintenance of
responsible loan underwriting
standards, and other protections
deemed appropriate by their
primary regulator."
But the Administration's vision
for the GSEs did not include
affordable housing. The
privatized GSEs would, under the
proposal, "focus on secondary
market liquidity for mortgage
loans to qualified borrowers,
while HUD would assume primary
responsibility for affordable
housing objectives by providing
support to low- and moderateincome families that cannot be
fulfilled through traditional
underwriting and other housing
assistance grants and subsidies.
To effectuate this, the newly
fully-privatized GSEs would have
mandates focused on defining
the appropriate lending markets
served in order to level the
playing field with the private
sector and avoid unnecessary
cross-subsidization. A separate
fee on the outstanding volume of
the MBS issued by guarantors
would be used specifically for
affordable housing purposes, and

would be transferred through
congressional appropriations to,
and administered by, HUD."
"MBA applauds the
Administration for releasing a
proposal to reform Fannie Mae
and Freddie Mac which closely
tracks much of the work that has
been done to date by
policymakers on Capitol Hill,"
said David H. Stevens, CMB,
President and CEO of the
Mortgage Bankers Association
(MBA). Stevens and the MBA
have been staunch supporters of
Trump's GSE reform. "It includes
many core principles that MBA
has long advocated for, such as
an explicit government guarantee
on MBS only as a catastrophic
backstop, allowing for multiple
guarantors and ensuring small
lender access. MBA is heartened
that the proposal recognizes that
reform must be part of any plan
before either Fannie Mae or
Freddie Mac is released from
conservatorship. As with any
proposal of this size, the devil is
in the details and MBA looks
forward to working with the
Administration, and Congress to
finally tackle this long overdue
issue."
Not all agreed the
Administration's measure would
be a true fix.
"A decade ago, excessive Wall
Street greed and predatory
lending led to a tsunami of
unnecessary foreclosures that
took away the homes of millions
of hardworking families," said

Nikitra Bailey, Executive Vice
President at the Center for
Responsible Lending. "That
experience should have served
as a warning to this
administration about the harmful
costs of reckless deregulation
letting greed go unchecked on all
Americans. Unfortunately, the
White House has not learned
from history. This proposal is a
bull in a china shop that
threatens to harm our recovering
economy and exacerbate our
affordable housing crisis.
Congress should reject this
misguided plan."
No timeline was offered by the
Administration on when this
proposal could be enacted, but
the Administration did hold true
to its promise, made by Treasury
Secretary Steven Mnuchin last
September, that GSE reform was
approximately a year away.
Arch MI Donates
$100K to MBA Opens
Doors Foundation

The MBA Opens Doors
Foundation has recognized Arch
Mortgage Insurance Company
(Arch MI), for a $100,000 gift to
support the Foundation's mission
of assisting families with critically
ill or injured children. The gift
brings Arch MI's giving in 2018 to
more than $200,000.
"When Arch stepped up to
make a long-term commitment, it
provided the MBA Opens Doors
Foundation the opportunity to


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