Scotsman Guide 11/30/16 – Treasury pick Mnuchin pushes GSE privatization

 

Nov 30, 2016  15:05 ET
Treasury pick Mnuchin pushes GSE privatization

 

President-elect Donald Trump’s pick to lead the U.S. Treasury said reforming and privatizing Fannie Mae and Freddie Mac would be a top priority for the administration.

Steven Mnuchin, a former Goldman Sachs executive and hedge fund manager, told Fox Business News on Wednesday that privatizing the government-sponsored enterprises (GSEs) was on the administration’s “top 10 list” and “we’ll get it done reasonably fast.”

Mnuchin, 53, was named Wednesday by Trump as his pick for Treasury secretary.

“We’ve got to get Fannie and Freddie out of government ownership,” Mnuchin said. “It makes no sense that these are owned by the government and have been controlled by the government for as long as they have.”

Mnuchin also said the GSEs “were not exactly role models” and were “displacing private lending” in the mortgage markets.

“So let me just be clear. We’ll make sure that when they’re restructured they’ll be safer, and they don’t get taken over again, but we have to get them out of government control.”

Fannie and Freddie, which finance about half the home mortgages in the United States and are important financiers of affordable apartments, were bailed out and taken over by the government in 2008. Currently, all their profits are swept up by the government and their business decisions are strictly controlled by the government. There are several proposals to reform the GSEs,  but reform efforts have stalled in Congress.

Mortgage trade groups that have advocated for housing-finance reform were encouraged by Mnuchin’s comments.

“I’m encouraged to hear that ending the GSEs’ conservatorship will be a priority for the new administration and that they see the need to reform the system before releasing the GSEs from government control,” said David Stevens, president of the Mortgage Bankers Association. “We look forward to working with the next administration toward realizing this goal.”

Two groups representing smaller lenders, the Community Mortgage Lenders of America and the Community Home Lenders Association (CHLA), also were optimistic. Both groups have called on the GSE regulator Federal Housing Finance Agency to recapitalize the GSEs and embark on reforms that will eventually see them released from the conservatorship.

CHLA Executive Director Scott Olson said the details of the reforms are a point of concern, however.

“It is critical that we have a government guarantee on their [mortgage-backed securities] to avoid a jump in mortgage rates, and it is critical that explicit provisions be put in place to ensure equal and competitive access to community lenders, to avoid an origination market controlled by the large Wall Street banks to the detriment of consumers,” Olson told Scotsman Guide News. 

CHLA in the News