Replies to post #168994 on Fannie Mae-No Politics (FNMA)

[obiterdictum]

Yes. Agreed. And mutual ownership of the GSEs as a cooperative could be a very messy and complicated move. Who can be a mutual owner? On what basis does one become an owner? How is decision-making and control over the issuer guarantor activities (pricing, etc.) done by Fannie, Freddie, and others distributed? Who and how are the issue guarantors and mass of mutual owners regulated?

These questions alone are difficult to answer since every institution who believes and wants to be involved in the secondary mortgage market will not want to get the short end of the stick in the market or not be able to participate equally (i.e. small community banks vs. global banks, vs. credit unions vs. large mortgage lenders vs. ?)

Also, individuals in this model will most likely not be owners. Shareholders will be eliminated in an Eric Stein mutual ownership model.

Will fair compensation be given for stock currently held if such a model goes forward? The answer to this is clearly uncertain.

Until these questions are answered in full detail with certainty, a mutual ownership model cannot be practically considered a viable option in GSE and housing finance reform by current shareholders.

These questions need answers. The holes in this model are equal to those found in S. 1217.

Finally, Watt and his special advisors (Moore, Ryan, Stein and Ugoletti) cannot make the decision to alter the GSE model into a mutual ownership one. That requires a Congressional legislative solution, one they are not ready to make.

However, like DeMarco who was significantly influenced by conservative financial policies, Watt is clearly influenced by progressive financial policies with doors open now directly to the current Administration through Jacob Lew, Megan Moore and Bob Ryan.

So we will see what steps he takes to alter DeMarco's preparations for legislative reform. We have yet to see Watt's strategic plan...So far his moves have tied him close to the current administration, the Democrat-led Senate, the Minority House and real estate organizations and consumers.

Will Watts seek to be an independent regulator as he has promised in his confirmation hearing?

Or will his ear be bent in the direction of his special advisors views of government control of housing, with private capital taking first loss in a mutual ownership of issue-guarantor scheme that eliminates private shareholding?

Time will tell.