3. To achieve this objective, investors would want to ensure that capital requirements are not too high, regulation and supervision is not too expensive, credit standards are sound and efforts to make housing more affordable do not impinge significantly on returns. Being able to issue MBS with a government backstop, even if the backstop is paid for through insurance premiums, is a business benefit because the backstop ensures the market will stay open during financial market disruptions. 4. Consumer Cost and Access to Credit: Homebuyers and borrowers are concerned with the all-in cost of obtaining financing. Higher capital requirements, more costly regulation and affordable-housing fees all add to consumer costs. Higher consumer costs, however, would likely be
In evaluating any proposal for GSE reform, three major objectives must be balanced: protecting taxpayers, attracting capital to Guarantors, and ensuring consumers and borrowers have access to affordable financing.”
In evaluating any proposal for GSE reform, three major objectives must be balanced: protecting taxpayers, attracting capital to Guarantors, and ensuring consumers and borrowers have access to affordable financing. Pushing too far in any direction may result in some of the objectives being missed. 1. Taxpayer Protection: The system should greatly reduce the likelihood that it would require taxpayer support in all but truly catastrophic,
potential losses, a clearly defined government backstop, strict regulation and supervision, a well- defined credit box and carefully targeted efforts to make housing more affordable. 2. Investor Returns: To generate the large amount of private capital required to fund such a system, the Guarantor business model and expected returns through the cycle need to be attractive. That is, private investors in the Guarantors would have a reasonable expectation of a market rate of return on a risk- adjusted basis.
systemic events. In order to accomplish this objective, the system should have significant private capital in place to absorb
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