Financial support from the government has helped Fannie Mae and Freddie Mac, get back on their feet from the financial breakdown in 2008. But now that the government is looking to part ways with the lenders, they are finding it hard to move on, due to new rules and regulations.
Andrew Davidson, a mortgage-industry consultant, told the Wall Street Journal, "I suspect that almost anything Fannie Mae and Freddie Mac want to do would probably run afoul of the rules."
The Journal reported that Fannie and Freddie were scheduled to issue new risk-sharing bonds to bring in more private investors but Commodity Futures Trading Commission regulations created during the 2010 Dodd-Frank financial crisis are adding more demanding responsibilities and costs.
"The 'commodity pool' structure of new risk-sharing bonds, which were intended to jumpstart the lackluster private, i.e., non-government backed, mortgage-backed securities market, means that they may require CFTC registration, increasing cost and limiting their appeal to investors," according to the Journal.
The new set of laws for these lenders is said to avoid another financial mess in the market. These rules and regulations are not only for the two lenders but also for real-estate investment trusts, and other investment companies, whether small or large.
"If it's hard for the FHFA and [Fannie or Freddie] to issue a securitization, what do you think it's like for an ordinary commercial issuer?" Davidson said.
