Securitization will play an integral part in whatever shape the future of U.S. housing finance takes, said Representative Scott Garrett today in at the American Securitization Forum's annual conference held in Orlando this week.
“We have a national housing market over $11 trillion and almost 75% of that market is financed through securitization," Garrett said. "You can’t have a mortgage market of that size without securitization."
What is clear, he added, is that having the federal government continue to underwrite 95% of the nation’s mortgage market and the Federal Housing Administration specifically insure 50% of new originations is completely unsustainable.
He added that he remained firmly committed to a purely private U.S. mortgage market over time, one that is free of government guarantees and subsidies.
But as the mortgage market transitions, Garrett said that the GSEs should consider unwinding some of the more liquid mortgage assets at a faster pace than what is currently envisioned.
"The GSEs own different assets and there are specific markets for each of these assets," Garrett said. "We need to more closely look at each of the portfolio components and figure out how to wind them down sooner to protect taxpayers."
Garrett warned that failing to sell these assets off can mean that the GSEs might find it increasingly difficult to hedge their books against interest rate risks and liquidating these assets more quickly would also reduce taxpayer risk.
Garrett also revisited the topic of conforming loan limits and said that the GSEs should not subsidize borrowers that are eligible for the upper limit of the current GSE conforming loan limit of $730,000.
Affordable housing goals should be abolished, according to Garrett. "It is absurd that these two entities, under federal government conservatorship and hemorrhaging billions of taxpayer dollars, have their conservator publishing new affordable housing goals for them to hit," he said. “The only goal these two entities should currently have is to reduce their burden on the American taxpayer.