House Members last week laid down two markers for GSE reform next year, reinforcing our forecast that change is in the air even before the Trump Administration turns to one of its Treasury Secretary nominee’s top priorities. Risk-shares in the near term are FHFA’s purview, one not likely to be much affected by these bills. In the longer term, risk-shares are a critical tool for winding down the conservatorships even if none of them deals with the fundamental question: the top-level “effective” USG guarantee for GSE RMBS that keeps TBA alive and creates continued demand for trillions in agency paper.
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