Are They Tripping?

NOV 12, 2012 11:03am ET

In an era where everyone is getting impatient with the amount of federal intervention in the mortgage market, the Federal Housing Finance Agency is talking about expanding the government’s reach into the private-label market.

My first thought on this was, are they tripping? But after some more reflection there might be a valuable germ of something here.

The idea would be to let Fannie Mae and Freddie Mac do private-label securitizations in addition to the agency market they now control.

This probably won’t sit well with those in Congress and elsewhere who want to see a resolution of the GSE problem. Adding to their market reach is probably not the resolution they had in mind.

But think about this. Everyone in the business has been searching for a nonagency market for the past several years. But no matter how bright a flashlight you have, there isn’t one to be seen.

Fannie and Freddie involvement might jump-start the jumbo and nonagency space, which would be a good thing. However, that involvement must be temporary. So if it happens, it ought to be with a date certain to get out of the market.

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