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Capital Markets

Real estate: Slow reforms hamper US MBS

As US house prices continue to rise, efforts to reform how the country’s housing market is financed are faltering.

By Ben Edwards

Bond investors are resisting attempts to encourage them back into the US mortgage market to shift the burden of any future losses away from the government’s mortgage agencies Fannie Mae and Freddie Mac

US senators Bob Corker and Mark Warner tabled a bill that would have wound down Fannie Mae and Freddie Mac and lured back private capital but it failed to secure cross-party support in the Senate last year and now with the US general election in November and a presidential election in 2016, the chances of imminent reform have faded.

John Sim-160x186

 The biggest reason [for the dearth of issuance] is a lack of broader participation by the larger banks

John Sim,
JPMorgan

“There was a lot of very visible activity a year ago, but there’s been nothing formal that’s happened since then,” says Steve Abrahams, head of MBS and securitization research at Deutsche Bank in New York. “Congress seems to have pretty much given up on hopes of getting anything done either this year or next year.”

The US government pledged to reform the country’s housing market after the 2008 financial crisis by reducing state support for home loans and by introducing tougher regulation.

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