Frannie Mae and Freddie Mac- from conservatorship to securitization
Northern, WI 03/06/2013 (gdpwatch) – A common platform will be created by Federal Home Loan Mortgage Corp (OTC:FMCC) and Fannie Mae to issue mortgage-backed securities. Their regulator said that both the mortgage companies are in the process of downsizing their operations and will no longer exist. The Federal Housing Finance Agency acting director, Edward J. DeMarco said that the single-family loan market will see the government –owned businesses sharing risks with private financers. They will be aiming at a 10 percent reduction in their multifamily-housing businesses. Security guarantees will be ensured by raising fees.
Both, Federal Home Loan Mortgage Corp (OTC:FMCC) and Fannie Mae are moving into their fifth year under American conservatorship and the agency goals were unveiled by DeMarco. Even as the nation’s housing finance system awaits a broader overhaul from President Barack Obama and the Congress, the FHFA is cutting operations. DeMarco said that the major challenge that everyone facing with understanding the housing-finance reform and transitioning into a world without conservatorship is that there are no standards and rules in place and there is no clarity about functioning.
Creating a foundation
The aim of setting these strategic goals in place is to create the infrastructure and standards that would make the transition a seamless one. Policies that back the resurgence of private capital in the mortgage-finance sector will help investors, said senior policy analyst, Jaret Seiberg from the Washington Research Group which is a unit of Guggenheim Securities LLC. This has automatically opened up opportunities for fixed income investors as well as big banks that are on the lookout for new methods of investing in the mortgage market.
Fannie Mae and Freddie Mac had been seized in 2008 by federal regulators as they were reeling under soaring losses. Taxpayer aid to the tune of $190 million breathed life into them and helped them regain profitability. The joint securitization company that is in the offing will have its own chairman and CEO. There will be a single standard for security issuing that will be self-sustainable if the companies do not exist any longer. Both enterprises will be tightening underwriting and raising prices in a bid to reduce their multifamily loan backing by 10 percent.
Shares of Federal Home Loan Mortgage Corp (OTC:FMCC) went up by 14.38% to close at $0.340