Infos zum Thema gse

The author suggests to put Freddie Mac und Faennie Mac in the hands of the US governments. On this path future risk-taking by this institutions could be avoided and the mortgage market could be opened for private companies, which in long run should replace the two GSE completely.

We propose a specific reform of Fannie Mae and Freddie Mac, the two GSEs that securitize and guarantee conforming mortgages. Under this proposal the two firms would become private companies that buy conforming mortgages and bundle them into securities that are eligible for government backing for a fee.

The major driver of the losses Freddie and Fannie incurred in the last two years were Alt-A mortgages they originated or insured in 2006 and 2007. These securities lost more than half of their nominal value. In the balance sheets of both GSEs are still holding not incurred losses of more than 300 mio. US$ in the next 5 years. Sounds like a lot of fun to come.