Fannie Mae-No Politics (FNMA)

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News: More Crystal Ball Gazing On Mortgage “Reform”
By Joseph "Woody" A. Woodruff | February 13, 2014
Posted in Loan Servicing, Regulatory

It's an opinion piece from a law firm blog, but still has a nice concluding remark.

http://www.bankinglawconnection.com/2014/02/13/more-crystal-ball-gazing-on-mortgage-reform/?utm_source=Mondaq&utm_medium=syndication&utm_campaign=inter-article-link

Lots of people are looking into lots of crystal balls trying to figure out what will become of Fannie Mae and Freddie Mac.

HUD Secretary Ray Donovan on February 12, told Politico’s Morning Money Breakfast Briefing that he was “optimistic” about what he described as “strong bipartisan effort on the Hill” to craft legislation in the Senate Banking Committee to overhaul mortgage lending. He predicted that a bill would emerge from the Banking Committee that would propose replacing GSEs Fannie Mae and Freddie Mac with a new agency giving the federal government a larger role in the mortgage finance market than contemplated in legislation the House Financial Services Committee approved in 2013.

The GSEs have returned to profitability, are on the cusp of fully repaying the treasury all of the $185 billion injected into them following the 2008 financial crisis, and are being used by the federal government as a source of revenue. Skeptics therefore are predicting that no mortgage overhaul legislation passes this year.

Private investors holding preferred shares of Fannie and Freddie still have much work to do if they are going to avoid government confiscation of their property amid federalization of the home mortgage market. But these investors are not giving up. In addition to public advocacy, more than 20 lawsuits have been filed by private stakeholders in the GSEs challenging the legality of the government’s unilateral action changing the terms of the bailout. They are growing incrementally more confident of victory.

You might think that investors-most of whom are individuals, retirement plans and community banks-fighting to protect their property from confiscation, uphold the rule of law and preserve the viability of a recovering housing market, would be favorably viewed as a group of Davids doing battle with the federal Goliath. But you would be mistaken to think so. Instead, these investors are being called “speculators” and “hedge funds” and accused by such luminaries as former Treasury Secretary Henry Paulson as being against progress.

Will the Obama Administration, with the willing assistance of Congressional Republicans who ought to know better, succeed in turning the mortgage industry into yet another sector of the economy that has been fundamentally transformed? Will abused investors win a victory in court that requires the federal government to disgorge more than a hundred billion dollars in wrongfully confiscated property? When I look into my crystal ball I cannot tell which side wins in the end. I am not willing to venture a guess on the outcome of legislation or litigation.

But I will predict one thing: unless the contending sides come to a compromise whereby the GSEs are recapitalized, released from conservatorship and restored to private control under regulatory oversight, it will end badly for everybody.