| GSE Reform
“Headway” Legislative
Level of
GSE
Credit Risk
Proposal
Government Involvement
Implication
Sharing
Status
Corker-Warner Bill
Limited: Only under
catastrophic scenarios where
losses on a pool of mortgages
exceeds 10%
Completely wound down over
5 years
10% first-loss piece is sold to
private entities
Corker-Warner under committee
discussion but not yet put to vote.
Either may become the front runner
from the Senate side but both will
likely have private capital in the
first loss place with several
mechanisms for risk sharing
Senate Banking Committee voted
in favor of the bill 13-9 on May 15.
Insufficient support to allow the
bill to be brought to the Senate
floor for debate/vote.
Johnson
-
Crapo
Bill
Based on Corker-Warner, limited:
only on scenarios where losses
on a pool of mortgages exceeds
a 10% private loss position.
GSE’s wound down over 5 year
period, replaced by FMIC.
Similar to Corker-Warner, 10%
first-loss piece is sold to private
entities.
PATH Act
Very limited: dissolves the
GSEs completely and reduces
the scope of the FHA/VA
guarantee
Placed into receivership and
completely liquidated with
Initially, a 10% risk-sharing
program on new GSE and FHA
business, although private market
securitization is intended
eventually to replace GSEs
No news. In early 2013, the Path
Act seemed to be the clear
front-runner on the House side.
The final housing finance reform,
if it happens, could be a
compromise between the PATH
Act and whatever comes out of
the Senate
Delaney-Carney-Himes
Limited: Ginnie Mae is required
to provide an explicit
government guarantee once
the 5% risk slice is eroded
when one of the private
monoline insurers defaults
GSEs will be slowly wound down
and eventually converted into
private reinsurers with limited
capacities to take on mortgage
credit risk
5% first-loss piece on each
new Ginnie Mae securitization,
as well as a 10% pro-rata risk
slice on the top 95% of each
Ginnie Mae securitization
Source: Barclays, CYS
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