Feb 9 (Reuters) - The Obama administration is due to unveil on Friday proposals for overhauling the troubled U.S. housing finance system.
The administration's white paper will seek to reduce the government's role in the mortgage market and will present a number of options to do so. For details see:
Debate on the issue is likely to last for many more months, with the White House under growing pressure to fix the mortgage giants Fannie Mae and Freddie Mac.
Known as government-sponsored enterprises, or GSEs, the two were seized by the government in 2008 in the financial crisis and have soaked up more than $150 billion in taxpayer aid. Their role in the system is to buy mortgages from lenders and repackage them as securities, giving the system liquidity.
Below are proposals from a range of industry groups, think tanks and lawmakers on what to do to repair housing finance.
Mark Zandi, chief economist, Moody's Analytics:
* Set up a hybrid of nationalized and privatized systems that keeps roles for the government -- insuring the system against catastrophe, standardizing securitization, regulating the system, and subsidizing disadvantaged households.
* Private markets would provide bulk of the capital and originate and own underlying mortgages and securities.
* Catastrophic insurance would be provided on mortgage securities only after major losses.
* Mortgage rates would be higher than they were pre-crisis, but in the hybrid system, rates would be almost 90 basis points lower than in a fully privatized system.
* The 30-year fixed-rate mortgage would be preserved, whereas it would quickly fade in a fully privatized system.
* Taxpayer bailouts would be unlikely.
* Downsized Fannie and Freddie could become federal catastrophic insurers.
Center for American Progress, a think tank with close ties to the Obama administration:
* Separate functions of Fannie and Freddie into issuers, chartered mortgage institutions, and an insurance fund.
* Chartered mortgage institutions would be regulated by the government and provide investors a guarantee of timely payment of principal and interest on mortgage-backed securities.
* Issuers could buy credit insurance on mortgage-backed securities from the chartered mortgage institution.
* Government would run a Catastrophic Risk Insurance Fund to set standards for mortgages to be securitized. The fund could backstop the regulated mortgage institution if needed.
* The insurance fund would take in premiums assessed on securities guaranteed by the regulated mortgage institution.
American Enterprise Institute, a conservative think tank:
* Eliminate need for government guarantees and for GSEs by only allowing prime quality mortgages to be securitized.
* Privatize Fannie and Freddie gradually so that private sector can take on more of the secondary market for mortgages.
* Gradually reduce the so-called conforming loan limit, or the size of the mortgages Fannie and Freddie may guarantee.
Mortgage Bankers Association:
* Preserve government role in mortgage market with a security-level credit guarantee backstop; risk-based premiums paid into a federal insurance fund; and loan-level guarantees from privately-owned, government-chartered and regulated mortgage credit guarantors.
* Government backstop should be explicit and focused on credit risk and liquidity of mortgage-related products.
* Loan-level guarantees should be able to absorb all mortgage-related credit losses so the federal insurance fund is called upon 'only in situations of extreme distress.'
* Centerpiece should be new line of mortgage-backed securities with a security-level, federal government guaranteed 'wrap' like that on a Ginnie Mae security; and the backing of private, loan-level guarantees from privately owned, government-chartered and regulated mortgage credit guarantors.
National Association of Realtors:
* Convert Fannie Mae and Freddie Mac into government chartered companies that are not owned by shareholders
* Federal government continues to back loans
* Does not specify how much support government should offer
American Bankers Association:
* Reduce government role in the mortgage market
* Increase guarantee fees, compensate government for its support
* Create more reasonable loan limits for GSE
* Create a regulated covered bond market. A covered bond is a type of security that forces originators to hold a portion of the credit risk.
* Envisions housing finance market where more than half of mortgage finance occurs without a federal guarantee
Representative Jeb Hensarling, the No. 4 Republican in the U.S. House of Representatives:
* Wind down Fannie and Freddie within five years.
Representative Scott Garrett, chairman of the House subcommittee on capital markets and the GSEs:
* Transition to a 'purely private' U.S. mortgage market and put GSEs back on official government books.
(Reporting by Rachelle Younglai, Corbett B. Daly, Kevin Drawbaugh, Margaret Chadbourn; Editing by Andrew Hay and Diane Craft) Keywords: USA HOUSING (rachelle.younglai@thomsonreuters.com; +1 202 898 8411) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The administration's white paper will seek to reduce the government's role in the mortgage market and will present a number of options to do so. For details see:
Debate on the issue is likely to last for many more months, with the White House under growing pressure to fix the mortgage giants Fannie Mae and Freddie Mac.
Known as government-sponsored enterprises, or GSEs, the two were seized by the government in 2008 in the financial crisis and have soaked up more than $150 billion in taxpayer aid. Their role in the system is to buy mortgages from lenders and repackage them as securities, giving the system liquidity.
Below are proposals from a range of industry groups, think tanks and lawmakers on what to do to repair housing finance.
Mark Zandi, chief economist, Moody's Analytics:
* Set up a hybrid of nationalized and privatized systems that keeps roles for the government -- insuring the system against catastrophe, standardizing securitization, regulating the system, and subsidizing disadvantaged households.
* Private markets would provide bulk of the capital and originate and own underlying mortgages and securities.
* Catastrophic insurance would be provided on mortgage securities only after major losses.
* Mortgage rates would be higher than they were pre-crisis, but in the hybrid system, rates would be almost 90 basis points lower than in a fully privatized system.
* The 30-year fixed-rate mortgage would be preserved, whereas it would quickly fade in a fully privatized system.
* Taxpayer bailouts would be unlikely.
* Downsized Fannie and Freddie could become federal catastrophic insurers.
Center for American Progress, a think tank with close ties to the Obama administration:
* Separate functions of Fannie and Freddie into issuers, chartered mortgage institutions, and an insurance fund.
* Chartered mortgage institutions would be regulated by the government and provide investors a guarantee of timely payment of principal and interest on mortgage-backed securities.
* Issuers could buy credit insurance on mortgage-backed securities from the chartered mortgage institution.
* Government would run a Catastrophic Risk Insurance Fund to set standards for mortgages to be securitized. The fund could backstop the regulated mortgage institution if needed.
* The insurance fund would take in premiums assessed on securities guaranteed by the regulated mortgage institution.
American Enterprise Institute, a conservative think tank:
* Eliminate need for government guarantees and for GSEs by only allowing prime quality mortgages to be securitized.
* Privatize Fannie and Freddie gradually so that private sector can take on more of the secondary market for mortgages.
* Gradually reduce the so-called conforming loan limit, or the size of the mortgages Fannie and Freddie may guarantee.
Mortgage Bankers Association:
* Preserve government role in mortgage market with a security-level credit guarantee backstop; risk-based premiums paid into a federal insurance fund; and loan-level guarantees from privately-owned, government-chartered and regulated mortgage credit guarantors.
* Government backstop should be explicit and focused on credit risk and liquidity of mortgage-related products.
* Loan-level guarantees should be able to absorb all mortgage-related credit losses so the federal insurance fund is called upon 'only in situations of extreme distress.'
* Centerpiece should be new line of mortgage-backed securities with a security-level, federal government guaranteed 'wrap' like that on a Ginnie Mae security; and the backing of private, loan-level guarantees from privately owned, government-chartered and regulated mortgage credit guarantors.
National Association of Realtors:
* Convert Fannie Mae and Freddie Mac into government chartered companies that are not owned by shareholders
* Federal government continues to back loans
* Does not specify how much support government should offer
American Bankers Association:
* Reduce government role in the mortgage market
* Increase guarantee fees, compensate government for its support
* Create more reasonable loan limits for GSE
* Create a regulated covered bond market. A covered bond is a type of security that forces originators to hold a portion of the credit risk.
* Envisions housing finance market where more than half of mortgage finance occurs without a federal guarantee
Representative Jeb Hensarling, the No. 4 Republican in the U.S. House of Representatives:
* Wind down Fannie and Freddie within five years.
Representative Scott Garrett, chairman of the House subcommittee on capital markets and the GSEs:
* Transition to a 'purely private' U.S. mortgage market and put GSEs back on official government books.
(Reporting by Rachelle Younglai, Corbett B. Daly, Kevin Drawbaugh, Margaret Chadbourn; Editing by Andrew Hay and Diane Craft) Keywords: USA HOUSING (rachelle.younglai@thomsonreuters.com; +1 202 898 8411) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.