Report: Wind down Fannie and Freddie, but provide government backstop for mortgage securitization

LIVE NOW: Inman Connect San Francisco
Tune-in now to catch the livestream. Don't miss this chance to see real estate leaders tackle the industry's top problems.

Fannie Mae and Freddie Mac should be wound down and their securitization activities spun out into a new platform overseen by a new, FDIC-like federal agency, according to a bipartisan report by Moody’s Analytics Chief Economist Mark Zandi and former government officials.

The report envisions that mortgage-backed securities (MBS) would be insured by private firms that would not have the backing of the federal government, but which would be subject to federal regulation — much as insured banks and other depository institutions are today. MBS insurers would purchase catastrophic secondary insurance from the government, paying a guarantee fee. The government would ensure that MBS investors were paid if insurers became insolvent, but the MBS insurers themselves would be allowed to fail. Source: