Credit risk transfers have emerged as more than just a method for mitigating taxpayer exposure. They could be a key component of comprehensive housing finance reform.
Regardless of whether Congress could act, proponents don’t seem to fully appreciate the potential unintended consequences of a future without Fannie Mae and Freddie Mac.
Policymakers should differentiate between housing finance-related issues of real importance to the greater public interest, and those that concern only special interests.
The discounts that Fannie Mae and Freddie Mac used to offer large originators for selling them bulk bundles of mortgages continue to haunt small lenders, who worry a new housing finance system could revive the practice.
Readers this week highlighted the need for banks to upgrade payments systems, debated a small bank’s decision to ditch its legacy core vendor, lamented populist initiatives of the GSEs, and more.
Federal Reserve Board Gov. Jerome Powell stopped short of endorsing any single housing finance reform plan, but called on lawmakers to resolve what he described as the biggest unfinished business of the crisis.
