The Future of the Secondary Market Far From Decided

The fate of the secondary mortgage market is not likely to be decided this year or next, the president of the Mortgage Bankers Association ventured at the group's National Secondary Market Conference in New York. Moreover, it could be two or three years before the transition begins between the old, Fannie-Freddie dominated system and the one eventually created by Congress. "Transition is a big key," John Courson said during a town hall discussion on MBA's recommendations for the future role of government in the core secondary mortgage market. "But we've got to get liquidity back into the (present) system" before any changes are undertaken. A 23-member MBA task force has proposed a framework of changes for ensuring liquidity while protecting the taxpayer. Among the critical transition issues identified by Jay Brinkmann, the MBA's chief economist, during the meeting is that near-term needs do not drive the ultimate structure of the new secondary market. "We are looking at a three-year process at a minimum," Brinkmann said. The economist also said there may need to be interim loan guarantees as the government-sponsored enterprises are phased out. On the other hand, he offered that Fannie and Freddie's infrastructures--technology, human capital and standard documents--could be used as a foundation of any new system. Another issue that needs to be resolved is how and whether taxpayers are to be repaid for covering the two GSEs' losses, he told the session.