To the Point With Bob: MBA is Ready to Help Shape a Safe and Sound Exit Plan from GSE Conservatorship

(To the Point with Bob is a periodic blog by MBA President & CEO Bob Broeksmit, CMB.
You can view this and past blogs here)

A second Trump administration and a new Congress in 2025 once again raise the prospect of renewed efforts to remove Fannie Mae and Freddie Mac (the GSEs) from their federal government conservatorship, now in its 17th year.

Since 2008, grappling with the government’s role in the mortgage marketplace has been fraught with politics, complex policy details, and very real concerns about mortgage market disruptions. Under Presidents Obama, Trump, and Biden, amid shifting party control on Capitol Hill, consensus on an exit strategy has proved elusive, most recently in the final weeks of the first Trump Administration. That might change in the next two years with the GOP trifecta in Washington.

MBA welcomes the opportunity to work with policymakers to forge a path to finally end the conservatorship, which was never intended to be permanent. Resolution must be done carefully, with precision and an ample runway to ensure deep, liquid secondary markets for single- and multi-family mortgages through all economic cycles and in all geographic regions.

Releasing the GSEs from conservatorship will require locking in many of the administrative reforms MBA has successfully secured over the last 15 years – e.g., a level playing field for all sellers with respect to G-fees and variances, the uniform mortgage-backed security (UMBS), representation and warranty reforms, and a transparent “new activity” rule. In addition to codifying these reforms, Congress and the incoming Trump administration will need to come to terms on many other issues, including how to restructure Preferred Stock Purchase Agreements (PSPA) implemented during the Obama Administration. For MBA, the most critical issue to address before releasing the GSEs is the establishment of an explicit federal backstop for mortgage-backed securities.

The explicit federal guarantee is essential for maintaining stability and liquidity in the secondary market. The backstop undergirds global investors’ confidence in holding and selling mortgage-backed securities, which in turn enables homebuyers to access credit even as market conditions and interest rates fluctuate. Our 2017 white paper lays out specific ideas for promoting a vibrant and sustainable secondary market.

MBA supports legislative reforms that would establish this backstop and provide FHFA a “utility style” regulatory framework that empowers the agency to fix the structural flaws of the GSEs’ pre-crisis business models while preserving what works in the market today. We have long advocated for transparent policies, clear servicing requirements, and fair and equal access to the secondary market for lenders of all sizes and business models. We also support preserving the GSEs’ mandate on affordable housing.

Since the GSEs entered conservatorship, hundreds of lawmakers have come and gone. Enacting legislation will require educating the many members of the House and Senate who were not in office during the financial crisis and those who have not participated in the prior debates on “GSE reform.”

The good news is that, unlike ten years ago, we are not starting from scratch to rebuild the secondary market. Instead, we have shortened the playing field and are talking about preserving and reforming the GSEs we have, locking in certain conservatorship reforms, and providing an explicit backstop to the GSEs’ MBS.

MBA has convened a blue-ribbon task force representing both the multifamily and single-family sectors that has been meeting for the last year to delve into the many complex issues and discuss the practical implications of ending conservatorship. We look forward to working with officials in the incoming Trump Administration at the White House, Treasury Department and FHFA – and the Congress – to ensure that the transition to a post-conservatorship era for the GSEs is done the right way.

Since their inception, the GSEs have provided liquidity and stability in the mortgage marketplace, enabling millions of families to achieve the American Dream of homeownership. Fannie and Freddie play a critical role in financial markets. Everyone has a stake in addressing this last piece of unfinished business from the 2008 financial crisis and sustaining a housing finance system that serves the interests of homeowners and renters now and for many years to come. MBA and its members stand ready to lead and to get this right for the benefit of consumers and the real estate finance industry.