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THE LATEST SECONDARY MARKET FHFA Rolls Out New Restructuring Proposal for the GSEs A new measure from the government agency outlines more steps to shift risk and responsibility away from Fannie Mae and Freddie Mac. market that lawmakers would need to establish without de- stabilizing a cornerstone of the economy and housing market. The balancing act would sup- plant Fannie Mae and Freddie Mac with new institutions able to shoulder $100 billion in new mortgage originations each month and take taxpayers off the hook, all without forcing interest rates to climb or limit credit availability for homeowners. Under the FHFA plan, Congress would establish a secu- ritization platform that main- tains the relationship between homeowners and investors and preserves federal guarantees for asset-backed securities. It leaves a transition period from GSE to private company to the boards of directors and future leaders of Fannie Mae and Freddie Mac, and calls for lawmakers to extend foreclosure prevention programs already in place. DeMarco said that the agency "looks forward to working with Congress and the Administration on a resolution of the conser- vatorships and a comprehensive review of the nation's housing finance system." As recipients of roughly $180 billion in taxpayer funds, the GSEs remain at the center of a storm of controversy on Capitol Hill. The FHFA said in the propos- al that Fannie Mae and Freddie Mac will not be able to repay taxpayers for their losses in "any foreseeable scenario," adding that the companies will require "substantial investment" to safely exit conservatorship. The FHFA also said that it T he federal agency responsible for Fannie Mae and Freddie Mac released a proposal that calls for lawmakers to gradually wean the GSEs off taxpayer funds and stand up a new secondary market, replete with new institu- tions, securitization measures, and servicing standards. Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco addressed lawmakers seated on House and Senate financial services committees in a 21-page proposal. "With the conservatorships operating for more than three years and no near-term resolution in sight, it is time to update and extend the goals and directions of the conservatorships," he said in a statement included with the proposal. He said that the agency is "contemplating next steps to build an infrastructure for the secondary market that is consistent with existing policy proposals and will support any outcome of the leading legislative proposals." The strategic plan outlines steps for ways to shift risk and responsibility from Fannie Mae and Freddie Mac to a new would soon roll out new com- pensation structures for senior- level executives that strips bonus pay and defers salaries. David Stevens, president and CEO of the Mortgage Bankers Association, welcomed the proposal in a statement, saying, "Moving towards a single secu- rity, aligning servicing require- ments and reducing the retained portfolios while avoiding a fire sale are all moves that we have supported." THE M REPORT | 73 ORIGINATION SERVICING ANALYTICS SECONDARY MARKET