Bipartisan Discussion Highlights GSE Reform, Risk Transfer, Need for More Private Capital

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How Regulation Will Increase Over the Next Decade Next: Fifth Third to Pay $85 Million to Settle Claims of Fraud on FHA-Insured Loans Data Provider Black Knight to Acquire Top of Mind 2 days ago Fannie Mae and Freddie Mac were placed into conservatorship seven years ago, and questions still linger as to how and when to reform the GSEs.The Bipartisan Policy Center hosted a keynote address and panel discussion titled “Housing Fiance Reform: Opportunities and Obstacles of Risk Sharing” on Tuesday.The event highlighted GSE reform and conservatorship, the need for more private capital in the financial system and to transfer risk away from taxpayers and GSEs, focusing on risk sharing, specifically “front-end,” which makes housing finance more sustainable.While the GSEs are experimenting with additional forms of risk sharing, all of them are handled on the back end after the loan is on the GSEs balance sheets.The keynote speakers were Sen. Bob Corker (R-Tennessee), member of the Senate Banking Committee and Sen. Mark Warner (D-Virginia), ranking member of the Senate Securities, Insurance, and Investment Banking Subcommittee.The panel included Laurie Goodman, director of the housing finance policy center at Urban Institute; Mike Fratantoni, chief economist at the Mortgage Bankers Association; Kevin Chavers, managing director at BlackRock; Pat Sinks, CEO of Mortgage Guaranty Insurance Corp.; and Bob Ryan, acting deputy director of the division of conservatorship at the Federal Housing Finance Agency.Nic Retsinas, senior lecturer in real estate at Harvard Business School, moderated the panel.”Some of our wingers are migrating over to this third amendment thing because it makes it easy not to do anything.”—Senator Bob CorkerIn June, a bipartisan group of Senate Banking Committee members wrote a letter to the Federal Housing Finance Agency (FHFA) requesting that the agency expand and provide better transparency of the development of the credit risk transfer programs.These programs shift credit risk from Fannie Mae and Freddie Mac to the private sector, according to a press release.”We supported the direction of the risk sharing language within Title VII of The Financial Regulatory Improvement Act of 2015, and we strongly support the expansion of these transactions, given they provide a vehicle for moving the government out of the first loss position and inform the process for policymakers looking to invite greater private capital into the market,” the senators noted in the letter.“The credit risk transfers are a vehicle for moving the housing market forward by attracting private sector investors, improving access to credit, and reducing taxpayer risk. As such, we ask that you prioritize work with the Enterprises on transactions designed specifically to push out first loss credit risk to the market, and to encourage transparency for investors and the public so that we can all better judge how these transactions impact returns to the Enterprises, costs to the taxpayer, and effects to the health of the broader housing finance system,” the letter stated.Corker cautioned that GSE reform could “be a while and won’t happen in the next year and four months. Some of our wingers are migrating over to this third amendment thing because it makes it easy not to do anything.”The overall consensus of the panelists was that moving forward, the goal should be to strengthen the housing market, build more capital, and enhance credit risk transfers.However, GSE reform could be a lengthy and a difficult issue to overcome as “legislation on this topic remains elusive, the new word for ‘not happening,’” the introductory speaker said.Click here to view a video of the event. Sign up for DS News Daily Tagged with: Bipartisan Policy Center Fannie Mae Freddie Mac GSE Reform Senator Bob Corker Senator Mark Warner Xhevrije West is a talented writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University. 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