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U.S. Treasury wants to change the way your mortgage loan is financed



The United States Department of Finance released a plan to reform the home financing system on Thursday, and it is designed to protect US taxpayers from future rescue operations.

The government spent $ 190 billion in taxpayer dollars to save government-sponsored companies or GSEs in 2008. They are the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

Treasury says the new reforms preserve the 30-year fixed rate and "help hard-working Americans meet their goal of buying a home."

Treasury Secretary Steven Mnuchin said in a press release, "An effective and efficient federal The housing finance system will also make a meaningful contribution to continued economic growth during this administration. "

The Treasury Department report states that although this plan includes both legislative and administrative reforms, the Treasury's preference and recommendation is that Congress should enact comprehensive housing finance reform legislation."

The report seeks to clarify the government's role in supporting the housing market. "Stability in the home financing system is crucial, and generally benefits the preservation of what works in the current system, including the long-term support for the 30-year fixed rate mortgage. , "it is called.

nt suggestions Treasury recommends:

  • Congress repeals the current statutory definitions related to GSE's regulatory capital that limits FHFA's (Federal Housing Finance Agency) discretion in prescribing regulatory capital requirements, and these definitions should not be incorporated into future legislation.

  • FHFA's potential regulatory capital requirements should require that each guarantor, or any pending legislation in anticipation of GSE, be properly capitalized by maintaining capital sufficient to remain viable as a continuing operation following a severe economic downturn, and also to ensure that shareholders and unsecured creditors, instead of taxpayers, incur losses.

  • FHFA's possible regulatory capital requirements should also include a simple, transparent leverage limitation that complements risk-based capital requirements.

The GSEs remain in the conservatory for more than ten years since the first government bailouts. The Treasury plan recommends that the conservatory end through recapitalization.

The plan may have the support of at least one former GSE insider. Edward Marco served as acting director of the Federal Housing Finance Agency (FHFA) from 2009 to 2014. In that role, he served as conservator for Fannie Mae and Freddie Mac, and he has recently proposed similar measures. In an interview on Yahoo Finance's On the Move last month, he said he was looking for reform to "shift all this risk from the back to the US taxpayers and back to private capital." He added, "fundamentally, we will need Congress to determine the role of the US government and the role of taxpayers in the US mortgage system."

Treasury's plan states: "FHFA should prescribe liquidity requirements that require every guarantor, or any pending legislation in anticipation of GSE, to maintain high-quality liquid assets sufficient to ensure that it operates in a secure manner. and sound manner. "

<p class =" canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8 em) – sm "type =" text "content =" Secretary Mnuchin will be heading to Capitol Hill & nbsp; this coming Tuesday & nbsp; to push his plan into a Senate Committee on Banking, Housing and Urban Affairs Hearing titled "Housing Financing Reform: The Next Step. Secretary Mnuchin will testify with Ben Carson, Secretary of the Housing and Urban Development Department." data-reactid = "29"> Secretary Mnuchin will visit Capitol Hill next Tuesday to push his plan into a Senate Committee on Banking, Housing and Urban Hearings titled "Housing Finance Reform: Next Steps." Secretary Mnuchin will testify with Ben Carson, secretary of the Department of Housing and Urban Development.

<p class = "canvas atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Adam Shapiro is an anchor for Yahoo Finance On the Move. "data-reactid =" 30 "> Adam Shapiro is a co-founder of Yahoo Finance On the Move.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Read the latest financial and business news from Yahoo Finance "data-reactid =" 31 "> Read the latest financial and business news from Yahoo Finance


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