The Acting Director of the Federal Housing Finance Agency (FHFA) said this week that risk management is not the only relevant consideration in reforming the nation's housing finance system.
Edward J. DeMarco, speaking to the 12 Annual Risk Management Convention, said, however, that the characteristics of the government's role in housing and the reform framework that is eventually put in place will define the degree of certainty market participants have regarding their own risk exposure in housing finance.
"The credit policies and guarantees put in place during the GSE reform process will ultimately dictate private investor demand for mortgage-backed securities", says MND's Managing Editor Adam Quinones. "That in turn will determine the level of mortgage rates relative to benchmark yields."
Despite their conservatorship status, DeMarco said, the government sponsored enterprises (GSEs) Freddie Mac and Fannie May remain at the center of the country's housing finance system, but that will have to change. The longer the future structure of the system remains uncertain, the more the operational risks of conservatorship will continue to emerge. Improving and simplifying the operations of the GSEs is part of FHFA's duty to preserve and conserve assets and is consistent with the notion of their "wind down," but the ultimate transformation of the GSEs and their market functions will largely depend on actions of Congress and the Administration. This leaves FHFA with the responsibilities of conservatorship while the long term course is determined.
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Source: http://www.mortgagenewsdaily.com/03102011_housing_finance_reform.asp
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