The Federal Housing Finance Administration announced on Monday that it plans to establish a new business entity that will be jointly owned by mortgage giants Fannie Mae and Freddie Mac. Their goal is to create a new securitization infrastructure that will revamp the US housing market and prevent future “bubbles” in the market caused by misaligned incentives, shoddy lending, and reckless money grabbing.
FHFA Director Edward DeMarco said the enterprise will initially be owned and funded by Fannie and Freddie, but the overall goal is to create something of value that could be sold or used as a foundational element of the mortgage market in the future. The entity is designed to be flexible in order to meet the goals and direction of policy makers initiating housing finance reform.
FHFA hopes that this rebirth of securitization will allow banks to lay off some of their risk in granting mortgages and prevent a repeat of the last housing crash.
Source: Forbes
