The new FHFA director Bill Pulte is aimed at GSE reform
Trump wants to finish what he started in his first term
It is generally expected that the Trump administration will end what they started in its first term and privatize Fannie and Freddie. Although probably a process of years, the administration began to lay the foundation at the beginning of the year, when the Treasury Department and FHFA have announced an agreement to change the preference sharing purchase agreements (PSPAs) with Fannie and Freddie, who $ 330 billion owes senior preference shares to Treasury.
In a press release at the time, Treasury said that the amended agreement “would help to ensure that the final release of the GSEs from the conservatory will be orderly and reflect certain existing practices.”
An orderly output
The orderness of the exit process is a theme for anyone talking about the exit, including Pulte in his confirmation hearing in February.
“Although their conservatory may not be indefinite, every output of the conservatory must be carefully planned to guarantee the safety and reliability of the housing market without upward pressure on mortgage interest,” he said.
The MortGage Bankers Association has made a safe and solid output of their advocacy since the elections. During the IMB conference of the MBA in January, MBA CEO Bob Broeksmit identified four umbrella principles that, according to the trade group, should frame the release of Fannie and Freddie:
- An explicit backstop. “Without this can buy, keep, keep and sell the trust of global investors in danger, which would strongly influence the liquidity on the market and increase the rates even higher than they are now,” said Broeksmit.
- A level playing field. FHFA must ensure that “prices and insurance do not vary for a lender based on size, business model or charter.”
- The clear line between primary and secondary market functions. This must be “clearly defined and rigorously enforced by FHFA.”
- Regular improvements at FHFA. FHFA must be granted “the necessary powers and responsibilities to regulate GSE returns and market behavior, often seen as authorities in utilities.
The biggest obstacle? A tax assessment
Even with all other parts for an exit, one major obstacle will continue to exist: receive a tax assessment to permanently make the 20% deduction of qualified income for transit activities. That is a provision of the 2017 Tax Cuts and Jobs Act (TCJA) that is planned to expire at the end of this year without congress actions, and it is the real first priority for Finance Scott Bessent.
“At the moment, priority is tax policy,” he said in one interview With Bloomberg after his confirmation. “As soon as we get through it, we will think about it. The priority for a release of Fannie and Freddie – the most important statistics I am looking at is a study or hint that the mortgage interest rate would rise. So everything that is done around a safe and good release will depend on the effect on the long -term mortgage interest. “
The details of the tax assessment are still in the congress and it came out there is not a clear time frame for his passage.
Read more: updated list of all Trump promotions that influence housing
