GSE Reform Coming?

The Wall Street Journal (6 Feb 2025) reported that the newly confirmed Secretary of HUD (Housing and Urban Development), Mr. Scott Turner, will be “quarterbacking” an effort to privatize Fannie Mae and Freddie Mac, working with the Treasury and Congress.  The Journal said that “it remains to be seen how much of a priority privatization is for President Trump.”  Skeptics warn of damage to the forward market for MBS that permits lenders to lock in mortgage rates for borrowers at the time of application for a loan. 

If there is movement on the two GSEs, there is likely to be a wider discussion of housing finance, which opens the door for discussing covered bonds as an element of a stronger private market to support housing if the roles of Fannie Mae and Freddie Mac are reduced.  As noted previously, SEC registered RMBS is also seen as an important contributor to a stronger private market for financing residential mortgage loans.