ABA, Groups Urge Locking in Reforms Before GSE Conservatorships End

The American Bankers Association and several housing industry groups urged the Department of Treasury yesterday to ensure that reforms for Fannie Mae and Freddie Mac are locked in before conservatorship ends for the government sponsored enterprises. In a letter to Treasury, ABA and the groups expressed concern that ending conservatorship without durable GSE reform would create volatility in the mortgage markets “and impede access to credit for consumers.”

“A sudden shift in the government’s relationship with the GSEs, which could end conservatorship without an explicit federal backstop in place, could cause investors to reassess the nature of any backstop and result in severe market disruptions,” the groups wrote.

The groups asked that Treasury and the Federal Housing Finance Agency raise the GSEs’ capital reserve threshold and implement market conduct reforms including: equal secondary market access for all lenders, strict limits on the size and use of the GSEs’ mortgage investment portfolios, availability of cash window delivery of loans, promotion of the use of credit risk transfer offerings, prohibition on primary market participants owning a controlling stake in the GSEs and greater transparency.