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MBA Outlines Approach for GSE Reform

Tuesday, February 21, 2017  
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MBA Outlines Approach for GSE Reform

The Mortgage Bankers Association (MBA) released a paper outlining its recommended approach for secondary mortgage market reform. The approach proposes the end of conservatorship of Fannie Mae and Freddie Mac (the GSEs) and replacing them with a new insurance program with an explicit federal guarantee. The paper emphasizes the need to ensure a smooth transition to a reformed secondary mortgage market.

The paper encourages multiple guarantors that would be 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 guarantee would only be for the securities and not the entities issuing them. The entities would have a public purpose of providing sustainable credit availability to the conventional single family and multifamily mortgage market and providing equitable access to lenders of all sizes and business models. To address underserved markets nationwide, the entities would be responsible for executing an affordable housing strategy to ensure broad access to credit. 

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