It is better to address the future of the GSEs now rather than wait for stability in the market because if it is done at that time, it would reintroduce instability, Fannie Mae chief economist Doug Duncan told the Regional Conference of the Mortgage Bankers Associations in Atlantic City.
“There is no single silver bullet” that will make everyone happy, Duncan argued, but any solution needs to be related to what the policy objectives are, he said.
There is a consensus in Washington that securitization must be part of the solution. But there is less consensus regarding if the 30-year fixed rate prepayable mortgage should be included, he said.
Duncan noted that the bulk of Americans are “culturally attuned” to the concept of a 30-year FRM.
Those who develop the solution need to decide what institutions will best support those loan structures, he said.
A discussion about the future of the Federal Housing Administration program needs to take place at the same time, including the government's overall role in the secondary market.
While some type of secondary market mechanism needs to be carried over from the GSEs, there quite likely will be the “extinguishment” of the Fannie Mae and Freddie Mac names, Duncan said.
