Fitch Ratings said two potential reforms offer the most promise for bringing private capital back into the mortgage market. The first is for the
It said “the effect of higher g-fees is likely to be gradual and it is challenging to forecast the level at which private execution will be more economic.” Among the clouds in Fitch’s crystal ball are the impact of Basel III and what will be the risk-retention requirements in the qualified residential mortgage rule.
The other reform, which Fitch said FHFA acting director Ed DeMarco has not specifically mentioned, is a further reduction in the conforming loan limits. This would push more loans into the jumbo category.
Fitch added FHFA has pointed to the greater use of risk-sharing structures that could bring in private money. “We view this as a positive step, but the FHFA’s initial target of $30 billion in risk-sharing for this year is very small relative to the outstanding balance of GSE-supported mortgages and recent issuance volumes,” the ratings agency said.
