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FHFA Unveils Changes to Reform Plan for Secondary Market

The ""Federal Housing Finance Agency"":http://www.fhfa.gov/Default.aspx (FHFA) unveiled new additions to the strategic plan it released in February this year, with many changes focused on moving the secondary mortgage market back to private capital sources and creating infrastructure needed to replace ""Fannie Mae"":http://www.fanniemae.com/portal/index.html and ""Freddie Mac"":http://www.freddiemac.com/.

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The additions include four principles, such as safety and security for the residential mortgage market, stability and liquidity in housing finance, and preservation of current enterprise assets.

The plan, due for enactment if passed by Congress between the years 2013 and 2017, advocated

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for preparation for the future of housing finance as a fourth principle.

""The challenge for FHFA is how to reduce the Enterprises' position in the marketplace in a safe and sound manner without comparable private-sector players,"" the proposal said. ""FHFA will take steps to establish a path for shifting mortgage credit risk from the Enterprises to the private sector and gradually reduce the Enterprises' proportion of the market.""

The new additions are more specific than the guidelines proposed by the FHFA in February. The federal regulatory called on lawmakers to help devise a new securitization platform absent federal guarantees, streamline risk management for the GSEs, and strengthen supervision of the mortgage companies.

If passed without any changes by Congress, the FHFA's new strategic plan would raise guarantee fees for lenders, shift credit risk to private investors in mortgage-backed securities, and extend insurance coverage for those mortgage insurers with the capacity.

The FHFA would also want to identify new risks to the GSEs and increase transparency with a loan-level disclosure program.

The agency cited ongoing uncertainty in the domestic and global financial market as one stumbling block ahead of it, if the strategic plan takes effect.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.
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