Sens. Corker (R-TN), Warner (D-VA) and a group of bipartisan cosponsors have started a newly-serious discussion of GSE reform with a comprehensive bill designed both to liquidate the GSEs and replace them in part with a new federally-backed securitization program that, under a new Federal Mortgage Insurance Corporation (FMIC), would provide backstop credit-risk protection for eligible residential mortgage-backed securities and, under stress, also back the entire eligible-mortgage market. Private credit-risk guarantors subject to significant new regulation would be required to take the first ten percent risk tranche in these MBS, and loan-level credit risk mitigation (CRM) would also be required for mortgages with loan-to-value (LTV) ratios above eighty percent. A new affordable-housing fund would be created, with the bill also stipulating numerous provisions to ensure that community banks and credit unions have access to the new guarantee system.
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