In a recent paper released by the New York Federal Reserve, two economists conclude that a liquid private securitization market has in the past and can in the future provide a prepayable 30-year fixed rate mortgage without an explicit or implicit federal guarantee.   Instead, only a liquidity facility would be needed to ensure that – under stress and only under stress—30-year FRM liquidity is sustained to support the private TBA market that would succeed the GSEs once they are made to disappear. We here assess this study which – right, wrong or sideways – will influence the policy debate over whether or not there needs to be something like the GSEs to keep the 30-year FRM alive for the middle class.

The full report is available to subscription clients. To find out how you can sign up for the service, click here