It is not every day, that a complete shift in federal policy concerning financial institutions occurs. This week, Palm State Mortgage brings you a look at the new perspectives on Fannie Mae and Freddie Mac. These shifts in policy were introduced Tuesday by Melvin L. Watt. As you might know, he is the federal overseer of the mortgage finance giants.
According to Tuesday’s New York Times article, Melvin L. Watt articulated three policy swings in his speech:
1. He advocated maintaining the housing market roles of Fannie and Freddie instead of mitigating them.
2. He stated a desire to “spur more home lending.”
3. He hopes to utilize Fannie and Freddie to continue assisting troubled homeowners.
Speaking as the new head of the Federal Housing Finance Agency, he stated, “Our overriding objective is to ensure that there is broad liquidity in the housing finance market and to do so in a way that is safe and sound.” You 
can read his keynote address, given at Brookings Institution in Washington, at this informative FHFA source.
During this speech he unveiled his new Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac along with their 2014 Conservatorship Scorecard.
Keeping his plans succinct and to the point, he constructed his future goals For Fannie and Freddie, on three pillars: maintain, reduce and build.
Palm State has created a little Briefing Of Mr. Watt’s Goals, complete with ABC’s:
I. Strategic Goal Number One: Maintain, in a safe and sound manner, foreclosure prevention activities and credit availability for new and refinanced mortgages to foster liquid, efficient, competitive and resilient national housing finance markets.
He stated, “we expect them to take actions that improve liquidity in the present single-family housing finance market. Second, we believe they should continue to improve servicing standards and foreclosure prevention actions. Third, we think they have a critical ongoing role in the multifamily sector, particularly for affordable multifamily properties.”
His new strategies for implementing this goal include:
A. The establishment of an independent “dispute resolution program.” If lenders believe a repurchase is unwarranted, they would plead their case to this impartial board.
B. The development of “cure mechanisms for loan defects.” This would mean alternatives to reliance on repurchases.
C. The clarification of the underwriting rules of Fannie Mae and Freddie Mac. He said, “Current Fannie Mae and Freddie Mac guidelines make some of these loans eligible for purchase, when the borrower has other compensating strengths. FHFA will continue to permit these compensating factors in each company’s underwriting.” This could become good news for some borrowers.
II. Strategic Goal Number Two: Reduce taxpayer risk by increasing the role of private capital in the mortgage market.
The FHFA’s second goal zooms in on ways to encourage an influx of additional private capital into the system. This would be done in order to reduce your risk as a taxpayer. Mr. Watt stated, that “the reduce goal focuses on ways to scale back Fannie Mae and Freddie Mac’s overall risk exposure. This approach allows us to meet our mandates of upholding safety and soundness and ensuring broad market liquidity.”
Keep in mind that the FHFA’s overall objective is 
to make certain that “private mortgage insurer counterparties to Fannie Mae and Freddie Mac can provide adequate credit loss protection in times of market stress.”
III. Strategic Goal Number Three: Build a new single-family securitization infrastructure for use by the Enterprises. Make that securitization infrastructure adaptable for other, future participants in the secondary market in the future.
A. At the center of this goal CSP, the Common Securitization Platform. This platform would guide the FHFA, Fannie and Freddie, into methods of managing the many risks they have uncovered. Mr. Watt stated, “We found that, because of the many variables involved, the main danger to the CSP effort would be pursuing too many objectives all at the same time.”
B. What about the future? Mr. Watt explained, “A successful outcome will be a seamless transition from the current in-house systems that issue new securities at each Enterprise to a future joint venture owned by Fannie Mae and Freddie Mac.” He also specified the use of updated technology to underscore this joint venture.
Thus, in an optimistic metaphor, developed by Palm State Mortgage Company, it is hoped that these three sturdy pillars of new policy, Maintain, Reduce and Build, will support a strong roof of financial security to shelter American home-owning families in the future.
Once again, we thank you for reading our blog, and hope you will return often for more mortgage news and views on the national, as well as the Florida scene in the twenty-first century.
