The Obama Administration today began formal consideration of reforming the U.S. housing-finance system, with Secretary Geithner making clear that the Administration is committed to “fundamental change” that will end the public-private structure for Fannie Mae and Freddie Mac. The Federal Home Loan Banks drew little attention, and various direct U.S. housing-finance agencies were generally considered in light of their potential relationship to restructured GSEs. Treasury Secretary Geithner spent considerable time seeking views on how to structure a new guarantee, looking in particular at a catastrophic-risk one that stood behind reserves and/or private capital. He rejected suggestions of new loan-to-value requirements and similar underwriting standards for the market as a whole, although he emphasized the need for prudent underwriting and improved transparency. Although Bill Gross of Pimco argued for complete federal control of the U.S. mortgage market, both Mr. Geithner and HUD Secretary Donovan emphasized that the Administration wants to reinvigorate private capital in prudent ways that also support increased rental and/or affordable housing. This report analyzes the public discussion at the Administration’s housing-reform roundtable. Hearings on the issue will resume in the fall, with the Administration set to release its plan by the end of January 2011.
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