A panel on the future of mortgage financing in the United States predicts a government-led initiative to sell distressed properties in bulk. Also, they say Fannie Mae and Freddie Mac will be around for quite some time despite congressional efforts to wind down the government-sponsored enterprises.
“When the conservatorship was established, we thought it would be a timeout for six months,” said Federal Housing Finance Agency Chief Economist Patrick Lawler. “It’s been three years and five months with no end in sight.”
Lawler said the FHFA is working to move Fannie and Freddie into the future, and good progress is being made. A big challenge is anticipating the market direction of the mortgage industry, Lawler added.
Jerry Diamond, a managing director at Annaly Capital Management and director of its related real estate investment trust Chimera Investment, said the recent hike in guarantee fees at the GSEs essentially keep the firms around for another 10 years. He did not feel bills in Congress to reduce the footprint of the GSEs would offer meaningful reform.
“This time next year will probably look like it does this year,” Diamond said.
The panel, which convened at the annual American Securitization Forum in Las Vegas, did offer a forward-looking perspective. Laurie Goodman, senior managing director-RMBS of Amherst Securities, said there is a big expectation the government will sell distressed properties in bulk to investors.
“This is a likely solution,” she said.
Currently, she said, investor capital is being raised to absorb the supply. Furthermore, she said buyers should look to buy up to 100 to 200 properties at a time in localized markets. This will help create a cottage industry around managing the properties.
Saul Sanders, co-CEO of mortgage investor Shellpoint Partners, said that market fundamentals remain challenging, but is confident that it is time to move forward.
“Originations are pristine,” he said, “and no one expects a further 30% decline in house prices.”