“MBA has been supportive of moving the enterprises out of conservatorship, because I think what our members have seen is Fannie and Freddie over time, becoming less responsive to market needs, not having that sensitivity of a private company,” Fratantoni said. “Pre-2008, they were acting like the private sector in terms of speed, responsiveness and ability to work with customers and meet their needs.
“That will be the benefit of moving them out of conservatorship. Perhaps this proposed IPO is moving in that direction. So that’s the positive. But the risk is that could all be overwhelmed if there’s a disruption in the secondary market that would lead to either more volatility in rates or a higher level of rates.”
He stated that the process could start relatively quickly if the Trump administration decides to move forward. Fratantoni said he expects they will take their time to unwind things properly and that it will likely involve expertise from several government departments.
“They’re likely going to tap into expertise across the government,” Fratantoni said. “At the Treasury and FHFA, at the Fed, some of the other financial regulatory agencies, and the SEC, because it really touches on all those spots. The quickest way for them to make changes is to revise the preferred stock purchase agreements. Those are agreements between the Treasury and FHFA and the GSEs.
“Rewriting or revising those contracts could happen fairly quickly. But given the dollars involved and the potential economic impact, I expect they will take the time to do it the right way.”
