Press Releases

Yesterday, the Subcommittee on Housing and Insurance reviewed the secondary mortgage.

On the Role of Government-Sponsored Enterprises (GSEs):

Chairman French Hill (AR-02) said, “Government-Sponsored Enterprises, specifically Fannie Mae and Freddie Mac, play a critical role in the secondary mortgage market, enhancing mortgage affordability by purchasing loans from lenders and securitizing them, keeping interest rates lower for homebuyers. While Fannie Mae and Freddie Mac were created to support housing finance, history has shown that poor decisions, inadequate oversight, and unchecked mission creep can impose serious costs for taxpayers and the broader economy.”

Subcommittee on Housing and Insurance Chairman Mike Flood (NE-01) said, “I think it's important, as we get into this conversation about GSEs, we have this beautiful thing called a 30 year fixed mortgage. They don't have that in South America. They don't have that in every country in even Europe or in Central America. We have it here. And not only do we have trillions of dollars coming in capital, we have other countries sending capital into the United States so that somebody in Laredo, Texas can achieve the American dream. And so we are, we have done something right as a country here.”

Witnesses Echoed the Work of the Committee:

Mr. Michael Bright, Chief Executive Officer, Structured Finance Association, said, “The American secondary mortgage market is an incredibly important yet complex ecosystem. It extends well beyond Fannie Mae, Freddie Mac, and Ginnie Mae, which are often the primary focus of policy discussions. These entities do not originate mortgages; they provide credit guarantees that support liquidity and standardization in the market. Operating in tandem with these governmentchartered agencies, there is an interconnected series of market participants, including mortgagebacked securities investors, broker-dealers, risk modelers, derivative hedging operations, prepayment analytical firms, and others. Together, these participants form the overall mortgage apparatus that supports mortgage lending nationwide.”

Mr. Robert D. Broeksmit, President and Chief Executive Officer, mortgage Bankers Association, said, “To increase secondary market competition and reduce reliance on taxpayer support, the structural impediments preventing a revival of the PLS market must be removed. Since the GFC, there have been very few public PLS issuances, with most deals being private placements. To reach the broader market, MBA believes the Securities and Exchange Commission (SEC) should proceed with its plan to revise the PLS disclosure framework, Reg AB II, to bring back SEC-registered PLS, which will deepen the pool of investors able to support the U.S. mortgage market. These changes should also include the standardization of both data and disclosure requirements and compliance with the Dodd Frank Act’s Qualified Residential Mortgage (QRM) definition.”

Dr. Norbert J. Michel, Vice President and Director, Center for Monetary and Financial Alternatives, Cato Institute, said, “One option for to start moving away from the GSE system is for the FHFA to remove Fannie and Freddie from conservatorship and place them into receivership (with the goal of liquidation). To place the GSEs into receivership, the FHFA must first reinstate the capital requirements and classify the GSEs as critically undercapitalized. Once the GSEs enter receivership, the FHFA director may begin the liquidation process and transfer GSE assets and liabilities into newly chartered limited-life regulated entities (LLREs). Each GSE charter would then be immediately transferred to the LLREs, and each LLRE would assume the powers and attributes of the GSE being liquidated.”

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