Housing Finance Requires Gov’t. Support, SIFMA Says

Posted by Orb Staff on July 22, 2010 No Comments
Categories : Residential Mortgage

ge credit would be both less available and more expensive in a mortgage finance industry that is devoid of government support, the [link=http://www.sifma.org]Securities Industry and Financial Markets Association[/link] (SIFMA) says. The trade organization shared its views on reforming the housing finance system in a comment letter to the U.S. Treasury. According to SIFMA President and CEO Tim Ryan, elements of the government-sponsored enterprises' (GSEs) current structures must be preserved. ‘We encourage policy-makers to fix what's broken without dismantling the aspects that have provided efficient, cost-effective lending and benefits to our economy for the last 30 years,’ Ryan says. In its letter, SIFMA says policymakers must consider how liquid secondary markets for loans and mortgage-backed securities (MBS) should be under a reformed housing finance system. Policy-makers must also determine the capacity of lenders to extend credit and whether national lending markets could be sustained or if regional pricing differentials would reappear before addressing what to do with the GSEs, the group says. SIFMA cautions that the urge to "slay the dragon" should not cause collateral damage that would eliminate or make impossible the beneficial impacts and legacy of the old system that developed around the GSEs. One of the most important impacts, SIFMA says, was fostering the development of a liquid forward market for MBS, known as the "to be announced" (TBA) market, which allowed lenders to hedge risk, attracted private capital, and reduced the cost of mortgage lending. A task force assembled by SIFMA believes that this TBA market is the key to a liquid and affordable mortgage market, as well as to ensuring a sufficient level of capital is available to banks to lend. The group says some form of an explicit government guarantee on MBS will be required to maintain the liquidity of the TBA MBS markets and that purely private-sector solutions cannot accomplish this important goal. The full letter is available on SIFMA's [link=http://www.sifma.org/legislative/pdf/SIFMA-TREAS-20100720.pdf]website[/link]. SOURCE: [link=http://www.sifma.org/news/news.aspx?id=17728]SIFMA[/link] Tag: resi http://www.sifma.org/legislative/pdf/SIFMA-TREAS-20100720.pdf http://www.sifma.org/news/news.aspx?id=

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