Fannie Mae and Freddie Mac are likely to remain key participants in the mortgage market as the private label securities market struggles to revive, according to a Fitch Ratings report.

Nine out of 10 mortgages still have some form of government backing, which means the GSEs remain the biggest players in U.S. mortgage market. Fannie Mae and Freddie Mac's key role in the housing market recovery makes it less likely that reforms to these government sponsored agencies will come in the near future, according to a Fitch Ratings report.

The private label securities market has yet to stage a comeback; this is made evident by the lackluster activity the sector saw in 2012. Only $6 billion of private label securities were issued last year, and the on-going concerns over risk retention and bank capital rules are likely to continue to limit investor appetite for private label mortgage assets.

Fitch said that increasing the guarantee fees (g-fees) mortgages, a trend that is likely to continue in 2013, is one of the more straightforward ways to attract private capital into the mortgage market.

However, the ratings agency said in the report that g-fees would need to rise materially before non-agency execution becomes a convincingly viable alternative.  “Increasing reliance on g-fees to fund various government spending programs is likely to limit the political feasibility of significant reform of the housing market,” said analysts in the report.

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