The Structured Finance Association ("SFA") urged the Treasury Department "to avoid the potentially destructive effects" of pushing Fannie Mae and Freddie Mac (the government-sponsored enterprises or the "GSEs") out from under conservatorship prematurely.
In a letter "on behalf of the 370 institutional members of the Structured Finance Association" to Treasury Secretary Steven Mnuchin, the SFA reaffirmed its support for releasing the GSEs from conservatorship. However, the SFA cautioned against a "hastily thrown together exit" from conservatorship based on the political calendar, preferring a timeline that takes "responsible, incremental steps." The SFA stated that its analysis of Treasury's plan for privatizing the GSEs was that it "could take years" to implement.
The SFA offered additional considerations before taking final action. These include assessing:
- the degree and type of government support that equity investors should price-in for mortgage-backed securities ("MBS") and GSE debt;
- the effects of privatization on the capital of banks that are major holders of GSE securities; and
- the ratings of MBS issued by the GSEs as compared to the ratings of U.S. sovereign debt.
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