Decoding Compliance

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feature SECONDARY MARKET DeMarco liquidity initiatives, noting efforts to "update master policies and formulate eligibility standards" related to mortgage insurance. "While this effort can be looked at as maintaining credit availability, it also seeks to strengthen and clarify standards to increase the reliability of this form of credit enhancement. This will be a needed step for mortgage insurance to remain a viable risk transfer mechanism in the future," DeMarco concluded. DeMarco and the FHFA hope to advance market movement by taking the following steps in 2013: •• Adapt faster to regulatory and market changes via appropriate enhancements to loss mitigation and refinance options. •• Enhance post-delivery quality control practices and transparency for new representation and warranty framework. •• Complete representation and warranty demands for preconservatorship loan activity. •• Develop counterparty risk management standards for mortgage insurers, including uniform master policies and eligibility requirements. •• Incorporate policies related to lender placed insurance within the Servicing Alignment Initiative. The Criticism take this book of business and put it out to the private market and let private capital develop and make it available?" A Steadfast Foundation The Objective The FHFA's final priority for 2013 will be the promotion of market stability and liquidity, as well as credit availability for new and refinanced mortgages, and the agency will couple these initiatives with ongoing efforts directed toward "foreclosure prevention activities." liquidity and foreclosure prevention reflect his stance, representing alternatives to such measures. Touting the FHFA's "extensive" foreclosure prevention efforts, DeMarco pointed to the agency's results, stating, "In 2012, we saw improvements as the changes made to HARP took effect. Some highlights of those changes include expanding the program to greater than 125 loan-to-value ratio, clarifying representation and warranty exposure, and incenting shorter-term refinance opportunities through reduced pricing." Providing further rationalization, DeMarco elaborated on the broader structural positives the FHFA hopes will result from What does Brinkmann laud as the answer to improving conditions for borrowers and aspiring homeowners? Reiterating his thoughts on the GSEs' influence on housing recovery, Brinkmann again highlighted the need to engage the private market. Refuting the idea that greater levels of private capital would inhibit potential homebuyers, Brinkmann countered that the strategy would result in better treatment for "small-balance borrowers" by stimulating "better pricing opportunities" due to competition in the marketplace. Brinkmann added, "The market would work a lot better if we had true competition and not the current system." The M Report | 77 se c on da r y m a r k e t Brinkmann referenced Ginnie Mae's successful repositioning, Despite political pressure, DeMarco continues to stand by his decision to reject principal reductions for struggling homeowners, a strategy he's described as the "least effective tool in the toolbox" for housing recovery, and the FHFA's focus on A na ly t ic s The Criticism The Rationalization s e r v ic i ng •• Demonstrate "viability of multiple types of risk transfer transactions" for single-family mortgages. •• Reduce portfolios by selling 5 percent of assets. •• Conduct performance assessments based on economic sensibility, operational control, meaningful transference of credit risk, and transparency in the marketplace. calling for an alternate approach to reducing the GSEs' role and preparing the entities for transition. Commenting on Ginnie Mae's strategy, he pointed out that the government organization "actually relies on private companies to . . . process payments, to provide the reporting. Why not Or ig i nat ion described should provide valuable information as to how close current guarantee fee pricing is to where private capital would be willing to absorb credit risk." DeMarco continued: "We are not there yet, but in conversations with market participants, I think we are getting closer. We also set some goals in 2012 of executing on risk sharing transactions. While we did not execute any transactions, a considerable amount of preparatory work was done to lay the groundwork for 2013." Laying out 2013 reduction targets for the GSEs, DeMarco set a goal of $30 billion of unpaid principal balance in credit risk sharing in the single-family market, along with a 10 percent decline in multifamily business activity versus last year. By setting specific targets for lowering Fannie and Freddie's market share, the FHFA will "assess the results . . . along with the utility of the transaction to furthering the long-term strategic goal of risk transfer." Additionally, the FHFA asserts that adhering to benchmarks will help gauge the timeline necessary for an "incremental approach to building a securitization infrastructure for the future . . . even in the absence of certainty regarding the ultimate housing finance structure and presence of a government guarantee in the future." The agency will take the following measures to continue contracting the GSEs during the year:

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