Bipartisan Policy Commissioner Lays out Secondary Market Reform Plan


This plan translates to “We get to keep the profits until we are faced with a potential large loss and then the government can step in and pay for it. We wouldn’t want to let the possibility of a normal business risk of loss to get in the way of us doing business.” It must be nice to write your own rules to guarantee yourself and your friends a profit. For a more detailed look at this subject please read the article below.

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In the latest of its consumer education videos, Zillow recently sat down with the Bipartisan Policy Center’s (BPC) Barry Zigas to discuss the center’s ideas for GSE reform and how they compare to current legislative efforts.

In an interview with Zillow chief economist Dr. Stan Humphries, Zigas—director of housing policy for the Consumer Federation of America and a commissioner on BPC’s Housing Commission—described how the group’s plan came together, a process that involved 16 months of research, hearings, and meetings with industry stakeholders.

“What we emerged with was a plan that was very true to the principles that the commission agreed to use to guide its work,” he said.

BPC’s plan shares similarities with those introduced by Sens. Bob Corker (R-Tennessee) and Mark Warner (D-Virginia) and by Rep. Jeb Hensarling (R-Texas) in that it calls for the unwinding of Fannie Mae and Freddie Mac over several years and the institution of a limited government guarantee on securities.

Where it differs is in the details; for example, the Corker/Warner bill puts a hard number on the amount of loss that must be absorbed before a federal backstop is trigged (10 percent), while the BPC plan allows for more wiggle room to adjust to market dynamics.

“For instance, if the insurer saw a housing bubble beginning to inflate, like we saw recently … they could basically make what we call the capital call on the insurers and say, ‘You need to put more capital in the pot,’” Zigas explained.

To read the complete article please use the link below.

Secondary Market Reform Plan

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