Fannie Mae as Middleman Angers Lenders

Fairly detailed overview concerning Fannie Mae's current situation:

Fannie Mae has “no goal relative to market share, except to reduce it,” Andrew Wilson, a spokesman, said. The firm has repeatedly said that it wants policy makers to decide how to reform the mortgage finance system and its future as quickly as possible, and is embracing directives by its regulator that are meant to bring in more private capital in the meantime and reduce its role, he said.

“We don’t play this big of a role because we want to,” Chief Executive Officer Timothy J. Mayopoulos said last month in a Bloomberg Television interview. “It’s really because we need to in order to provide liquidity and funding to the market.”

The expanded use of Fannie Mae’s cash window reflects originator preferences and is a responsible practice, according to Zach Oppenheimer, a senior vice president who heads customer engagement at Fannie Mae. It prevents some inexperienced lenders from creating its bonds because they haven’t shown the appropriate operational and financial resources, he said.

An originator issuing mortgage-backed securities must be prepared to hold on to loans before bonds are created, pool them with the correct disclosures needed by investors, and cover missed payments as a servicer in the event of borrower delinquencies, he said.

The company was formed in 1938 as part of President Franklin D. Roosevelt’s New Deal intended to help lift the country out of the Great Depression. Fannie Mae Profiting as Market Middleman Angers Lenders – Bloomberg.

The article also reinforces our earlier observations ( Scheduled Tweet: "Profit-transfers offset taxes but come from mortgagees & bond investors: How much do Fannie and Freddie still owe us?" ) concerning Fannie Mae regarding holding down taxes and the hybrid preferred shares aspect of the government's current position. Note John Paulson’s Paulson & Co.'s lobbying for privatization because that hedge fund owns preferred shares in Fannie Mae.

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