February 22, 2012
DeMarco calls on Congress to restructure secondary mortgage market
In a letter to Congress, Federal Housing Finance Agency acting director Edward DeMarco has proposed a plan to rebuild parts of the secondary mortgage industry from the ground up.
Specifically, DeMarco called for a restructuring of the secondary mortgage finance market while contracting activities at Fannie Mae and Freddie Mac.
"No private sector infrastructure exists today that is capable of securitizing the $100 billion per month in new mortgages being originated," DeMarco said in the letter. "Simply shutting down the enterprises would drive up interest rates and limit mortgage availability."
DeMarco noted that the lack of new private residential mortgage-backed securities is a primary factor that continues to hold back the recovery of both the mortgage industry and housing market. Without these securities competition among lenders will be reduced.
Additionally, he called for the total transparency of the marketplace, stating that investors should be able to have access to the information needed to directly track collateral performance.
The letter urged Congress to treat the restructuring of the secondary mortgage market with urgency by moving it away from the grip of government-sponsored enterprises and putting it back in the hands of the private market.