FHFA Paper: Taxpayers, Homebuyers, Fannie Mae Balance

When details of the Crapo-Johnson proposal for reforming Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) were first released, one of the surprises was that it would set capital requirements for any bank participating in the new program at 10% of risk weighted assets. At that level (and with a reinsurance policy on top), it’s hard to argue that Fannie Mae and Freddie Mac would be vulnerable to another housing crisis, but the additional financing costs would likely push lower income prospective homeowners out of the market.

This same tension between wanting to both shield taxpayers from risk and ensure that affordable mortgages are available is on display...