Building on steps the Federal Housing Finance Agency has taken to reform government-sponsored enterprises (GSE) Fannie Mae and Freddie Mac, five housing policy experts have proposed merging the two entities into a new corporation, called the National Mortgage Reinsurance Corp. (NMRC), that would continue risk-sharing initiatives with private investors and mortgage insurers.

In addition to acquiring conforming loans through originators or loan aggregators and issue securities, the NMRC would also guarantee timely payments and “ensure credit access for underserved communities through affordable housing initiatives,” as nationalmortgagenews reports. MHProNews understands the FHFA recently made a proposal for the possibility of a secondary market for chattel loans with Fannie and Freddie.

However, the NMRC would differ in that “It would be required to transfer all noncatastrophic credit risk on the securities that it issues to a broad range of private entities,” and its mortgage-backed securities would be fully backed by the U. S. government through the imposition of a G-fee that would cover any government risk. The FHFA would regulate the new agency, but Congress would have to approve a GSE merger.

Isaac Boltansky, an analyst with Compass Point Research and Trading, said, “While legislative GSE reform remains a distant dream at this point, the NMRC proposal represents a noteworthy mile marker in the policy conversation as it reinforces our belief that the mortgage finance debate in D.C. has shifted from liquidating the GSEs toward the consideration of a more simplified set of reforms.” ##

(Photo credit: Yahoo & Reuters/Jonathan Ernst–Fannie Mae headquarters)

Article submitted by Matthew J. Silver to Daily Business News-MHProNews.