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higher consumer and borrower costs. Guarantee fees are likely to be modestly higher than today given the increase in private capital required at the Guarantor level. However, moving to an explicit federal guarantee should increase the value of MBS, offsetting some of the higher costs to consumers. Ultimately the system will be more stable over time and hence the mortgage market will be available to consumers, even during severe downturns — a benefit that is worth the trade-off of modestly higher costs. Balancing competing priorities is always challenging. Leaning too far in any direction may result in missing other highly important goals. MBA’s proposal provides a workable solution that protects taxpayers, maintains access to credit for borrowers, and will attract significant private capital into the market. Ultimately the system will be more stable over time and hence the mortgage market will be available to consumers even during severe downturns ...“
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offset by a move to an explicit government guarantee of eligible MBS, as evidenced by the spread between prices on Ginnie Mae and GSE securities. Of course, not being able to get a loan — either because of tight credit criteria, increased costs or market disruption — has a negative impact as well. Roughly one-third of existing-home sales today go to first-time homebuyers, down from a historical average closer to 40 percent. One of the primary causes for this drop-off is the higher costs and tighter credit environment in today’s mortgage market. For first-time buyers and others on the margin, a tighter credit box can mean being shut out of the market altogether. Efforts to extend affordability and access to underserved borrowers are one of the items that FHFA or its successor would closely monitor in the system we envision. Under our proposed model, higher capital standards for the Guarantors and increased levels of private capital at risk would produce somewhat
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