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NEW YORK (
Fannie Mae(FNMA.OB) and
Freddie Mac(FMCC.OB) reform is still nothing more than a few competing hypotheses nearly four years after the government-sponsored enterprises (GSEs) were placed into conservatorship in the waning months of the Bush Administration, according to a report published Tuesday by credit research firm Creditsights.
It is "likely to take several years at a minimum, and possibly much longer," before we see a housing finance structure that differs from the current one, the report argues. Currently, mortgages are overwhelmingly backed by the GSEs, as private lenders "are skittish in the face of various areas of uncertainty," Creditsights' analysts observe. They came to their conclusion after attending the TCH-NYU Housing Finance Reform Roundtable held on May 30 at NYU School of Law, allowing them to hear from "academics, government officials, and mortgage industry participants all involved or interested in housing finance reform."
Participants agreed on little, according to report, except for the fact that there is little political will at the moment to push toward a solution.
Among the proposals on the table are a "government utility" model, a public-private hybrid in which the government would act as a backstop in a severe loss scenario as well as "a completely-privatized model with nearly no government participation," the report states.
One area where Creditsights analysts did see some "incremental progress" is the definition of what will become known as a Qualified Residential Mortgage (QRM). These mortgages will become the standard for the industry, as mortgages not deemed QRMs will require lenders to keep a larger portion of the risk on their balance sheets.
Written by Dan Freed in New York.
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