"The intent is noble most mortgage borrowers are indeed locked in by low interest rates from the pandemic, draining liquidity from the housing market and not allowing these borrowers to relocate when they should. The reality is more complicated this one-time fix is very hard to implement, would potentially cost MBS investors hundreds of billions, and could make GSE IPOs unviable. Instead, the FHFA should lay the groundwork for us not to have this conversation next time around."
"Meanwhile, the MBS investors providing trillions in liquidity and hedging the interest rate risk for the GSEs already took considerable losses over the last few years (likely over a trillion dollars in unrealized losses), holding pandemic MBS that currently pay much lower interest rate than short-term Treasuries. Making GSE mortgages assumable retroactively, in a way that would actually help borrowe"
A call for retroactive assumability of Fannie and Freddie mortgages aims to free borrowers locked in by low pandemic-era rates and restore housing market liquidity. Implementing a one-time retroactive solution would be operationally difficult and could impose hundreds of billions in losses on MBS investors, threatening future GSE IPOs. Existing FHA assumable mortgages illustrate practical barriers: appraisals do not reflect assumability, buyers often need high-rate second liens, and transactions remain complex for typical purchasers. Policymakers should instead build frameworks now that make assumability feasible for future originations and avoid retroactive disruption.
Read at www.housingwire.com
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