DeMarco Outlines Goals for GSEs

DeMarco Outlines Goals for GSEs

BY: KRISTA FRANKS BROCK

Federal Housing Finance Agency Acting Director Edward DeMarco released his 2013 priorities for the GSEs Monday. DeMarco anticipates the gradual reduction of the GSEs’ presence in the market, and this year’s goals largely build on last year’s.

“Despite some signs of normalization in the housing market, our Nation finds itself in the uncomfortable position of having over 90 percent of new mortgage originations supported by the Federal government,” DeMarco said.

DeMarco does not anticipate either Fannie Mae or Freddie Mac will exit conservatorship and return to the private sector. “Of the various legislative proposals that have been introduced in Congress, none of them envision the Enterprises exiting conservatorship in their current corporate form,” he said.

As such, FHFA’s goals for this year expand on last year’s three main goals of building an infrastructure for the future of the secondary market, contracting the GSEs’ role in the market, and maintaining the GSEs’ foreclosure prevention and credit availability efforts.

These goals will be achieved through several actions, including continuing to raise guarantee fees at the enterprises, which DeMarco suggests will attract private capital into the market.

DeMarco also set a goal of $30 billion of unpaid principal balance in credit risk sharing in the single-family market along with a 10 percent decline in multifamily business activity compared to 2012 at the enterprises this year.

As part of establishing a new infrastructure for the secondary market, FHFA intends to create an entirely new business entity this year. This business will function completely separately from Fannie Mae and Freddie Mac.

“[T]he overarching goal is to create something of value that could either be sold or used by policy makers as a foundational element of the mortgage market of the future,” DeMarco said.

The FHFA also intends to continue its work in creating standard industry guidelines through the Uniform Mortgage Data Program (UMDP).

The GSEs will also continue to develop their revised representation and warranty framework.

Lastly, the GSEs will continue “maintaining foreclosure prevention activities, and promoting market stability and liquidity.”

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