The plan to decrease the government-sponsored enterprises' market share is “credit positive” for some parts of the market, such as stronger mortgage insurers, but “credit negative” for others, such as GSE debt, according to Moody's Investors Service.
Fannie Mae's and Freddie Mac's unsecured debt currently carries Moody's top Aaa rating “entirely based on U.S. government support,” so “if government support for the GSEs shrinks, we would assess the GSEs' debt ratings based on the companies' capital position and financial profile.”
This “would likely result in ratings that are multiple notches below Aaa,” according to Moody's.
Other the other hand, “well-capitalized” mortgage insurers-such as United Guaranty Residential Insurance Co. and the newer Essent-could find the move credit positive as it would create greater reliance on and demand for their products, according to Moody's.
