#Urban Institute

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1 07, 2022

GSE-070122

2023-01-24T15:51:09-05:00July 1st, 2022|4- GSE Activity Report|

Plan B for UMBS?

FHFA today essentially conceded after its initial polite rebuff to an Urban Institute critique of the capital rules adverse impact on UMBS.  In a statement, the agency now says that continuing consultation with stakeholders persuades it that something must be done to protect the single security.  Although the GSEs will for now continue to charge their add-on guarantee fee, FHFA pledges a “near-term” review of the capital rule’s requirements, emphasizing its continuing commitment to listen to concerns.  In short, stand by for a bit of a capital rewrite unless FHFA comes up with Plan B.  We can’t think of what this might be other than a capital fix since the problem here is market perception, not GSE behavior, but FHFA is committed to its capital rule and will try something else if it can think of something else.

GSE-070122.pdf

23 06, 2022

GSE-062322

2023-01-25T15:52:27-05:00June 23rd, 2022|4- GSE Activity Report|

No Oops re UMBS

Following a sharp critique of GSE capital standards earlier today from the Urban Institute, FHFA Director Thompson today acknowledged Fannie and Freddie’s new 50 bps fees when one of the GSEs guarantees the other’s collateral for UMBS purposes.  The Urban Institute paper argued that these fees properly reflect the capital cost of the rules’ weightings related to these cross-guarantees, going on to say that the fees are likely over time to reduce investor appetite for Freddie Mac securities and thus undermine the UMBS construct and its broader benefits.

GSE-062322.pdf

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