For mortgage bankers, the secondary market is a lifeline. Take away warehouse lines and secondary-market execution, and there is no mortgage banking business. And, yes, of course, the big banks can always buy production. But portfolio lending can absorb only so much of the industry's loan volume.
So Fannie arid Freddie have been critical to the housing finance architecture for many years. Whole careers have been spent selling to them. That's why it's so hard to envision the industry without them.
Since September 2008, the two government-sponsored enterprises (GSEs) have been on life support provided by the federal government. That's a long time for the U.S. Treasury to be so intimately involved with two central business enterprises. The Federal Housing Finance Agency (FHFA) said as much with the title of its recent strategic plan for the GSEs. The title of the plan that FHFA delivered to Congress on Feb. 21 is A Strategic Plan for Enterprise Conservatorships: The Next Chapter in a Story that Needs an Ending. Indeed, we are in search of an ending. But what it will be is still not clear.
An article this month by Allen Jones,. chief operating officer of RiskSpan Inc., titled "Legislating G-Fees--What's Next?," discusses some of the tentative steps that Congress has taken toward moving the mortgage market off of its current unhealthy dependency on the GSEs. But legislating a hike in guarantee fees and using the funds to pay for an extension of a payroll tax holiday is a strange way to practice housing finance policy. It is just one more sign of the times--and these times are not normal, especially when it comes to the mortgage...