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Servicers May See G-Fee Relief.
Byline: Paul Muolo & Brian Collins
Washington-Mark Sunday morning, Sept. 7, 2008, as the day the residential mortgage business changed forever.
In the months ahead, seller/servicers that upstream their mortgages to Fannie Mae and Freddie Mac may see little change in the way they conduct business with the two but rest assured the Treasury Department under Hank Paulson has laid the groundwork for the eventual dismantling of these once politically powerful (and once highly profitable) government-chartered enterprises.
Over the long haul the takeover of the two GSEs could set the stage for housing deflation the likes of which Americans have not seen since the Great Depression and then some.
With less liquidity in the mortgage market that means less homebuyers and less homebuyers creates intense pricing pressure on the downside, which could lead to higher loan delinquencies.
Eventually, Treasury wants the two to whittle down their on-balance-sheet portfolios to $250 billion, about one-third of where they are today. Once the two GSEs stabilize, whoever sits in the White House will move to find a long-term solution to Fannie and Freddie.
They could survive as separate smaller companies with congressional charters or they could be made into one government agency that serves only low- and moderate-income Americans. If that happens the mortgage business likely will shift back to portfolio lenders like savings and loans, banks and credit unions.
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Source: HighBeam Research, Servicers May See G-Fee Relief.