It’s been five years since Uncle Sam placed Fannie Mae and Freddie Mac into conservatorship and private investors all but abandoned the housing finance sector. Yet, private capital is still not ready to come back to the market, speakers said at the Mortgage Bankers Association’s National Secondary Market Conference in New York.
In the town where the “Not Ready for Prime Time Players” made “Saturday Night Live” a must-watch television program for millions of people, Scott Simon of PIMCO and Laurie Goodman of the Amherst Securities Group said private capital is not yet ready for prime time—and won’t be for some time.
The notion that private capital is anxious to replace Fannie and Freddie is one of Simon’s pet peeves, he told the conference. Private capital “won’t come to life anytime soon,” the PIMCO executive said. And when it does, the price to consumers will be high.
Simon, the head of PIMCO’s mortgage-backed securities team, said his beef with the belief that the private-label MBS market is ready to burst forth is that no one has bothered to ask investors. If anyone had, he said, they’d know that’s just not true, that they’re not willing to swoop in and save the day.
“Forget overseas investors, they won’t buy anything that’s not insured by Ginnie Mae, Fannie Mae or Freddie Mac. And neither will banks,” the PIMCO managing director said. “So who’s magically going to make loans” to homebuyers?
Goodman, a senior managing director at Amherst, agreed. Although the supply-demand function for housing finance “remains seriously broken,” the analyst said, the market is “a ways away” from the return of private label MBS. “It’s going to take awhile longer.”
