OCT 15, 2012
The Blog Stops Here

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As the mortgage industry gets ready for its biggest meeting of the year, the Mortgage Bankers Association’s conference starting Sunday in Chicago, they will be thinking about a number of things.

They’ll be thinking about record-low mortgage rates and how long these will last, and how many refinancings will ensue.

They’ll be thinking about the alphabet spaghetti of regulatory groups and regulations they will have to sift through: QM, QRM, CFPB, FSOC.

And they’ll be thinking about the future of a nonconforming market and a related topic, the future of the government secondary market.

There have been proposals to merge Fannie Mae and Freddie Mac’s mortgage securities into a single product. I suggested that didn’t go quite far enough, and that merging the agencies entirely might be in order.

Another way to go would be to merge all three secondary market agencies under the aegis of Ginnie Mae, the most successful of the three to date. Ginnie Mae, however, is known to be loath to do this because of the extremely fragile capital base sustaining the Federal Housing Administration, which supplies the bulk of mortgages that Ginnie Mae securitizes.

Fannie Mae and Freddie Mac’s regulator, the Federal Housing Financing Agency, weighed in last week with a white paper on restructuring the GSEs. It puts forward the combined securitization platform and several other thoughtful ideas, including a framework for a model pooling and servicing agreement, and the question of the role of private capital in the new structure.

Private capital has been a great resource for the mortgage market—when times have been good. When times have been bad, it has hotfooted it out the door.

That’s why there’s a need for at least one entity like Fannie, Freddie, or Ginnie. As government agencies they follow public policy directives from the current Administration to help support the housing and mortgage markets.

There is a useful distinction between Ginnie and Fannie/Freddie that would be good to keep. Ginnie specializes in mortgages to first-time homebuyers and the underserved. Fannie/Freddie cater to the step-up market.

Then there’s the question of the second step-up market—jumbo mortgages, those above the Fannie/Freddie limits. No one is really doing a good job here. There are good reasons not to have government involvement in high-end margins. But who is going to stay with the sector when times are bad?

Yes, mortgage execs have a lot to think about as the MBA annual rolls away. I hope they will have time to think about us and our 13th annual Mortgage Technology Awards to be given out Sunday at 7:30 p.m. in the Crystal ballroom B and C, West Tower, green level at the Hyatt Regency Chicago. RSVP at www.nationalmortgagenews.com/technology/rsvp.html.

We’ll also be in evidence in the press room and at our booth 1110 in the exhibit hall. Hope to see you, and have a good MBA!

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