Why Trump’s Housing Revolution is at risk of mortgage turmoil

Donald Trump looks at the eye of what can become “the biggest job in history” and the stakes could not be higher.

It was possible to bring hundreds of billions of dollars to a public purse and promote the household. Or it can grow mortgage interest rates.

The deal is lucky to be the two mortgage giants that together about $ 7 trillion (5.2 trillion) together in the US dollar market. The amount is approximately doubling the size of the UK economy.

The two companies sponsored by the government (GSE) were almost during the financial crisis and pledged in 2008. By the US Treasury.

Over the past 17 years, they have been in the government’s conservatory, which means that they are guided by the Government Guarantee by the Government.

Now the president wants to start cashing.

“I pay very serious attention to the Public of Fannie Mae and Freddie Mac,” Trump wrote about the truth on May 21.

“Fannie Mae and Freddie Mac are doing very well, throwing a lot of money, and time seems to be right. Stay tense. “

Two GSE have a net worth of combined $ 161 billion. Selling some of these shares can compete with Saudi Aramco’s “Pre-Public Offer” (IPO) as a list of history.

But there are big possible problems.

It is unknown at this time what he will do after leaving the post. The deal raises questions about the threats of financial stability, and there is a risk that can pay higher loans.

At the beginning of June, a group of FHFA director William Pulz, led by Elizabeth Urdu, wrote the result of the Elysebeth Urdu group.

Fannie and Freddie are enormous. They support about 70 pieces of the US mortgage market. “Back in 2007, they were a significant piece of the market, now they are almost a whole,” says Jim’s Jrot.

GSE operates by buying mortgage loans from banks. They fill loans in trust and cut them to release mortgage support (MBS), an investment vehicle similar to the bond. They are then sold to insurers and pension funds.

Fannie and Freddie earn a payment by guaranteeing the debt. This is the bedding bed of the American financial system.

There are many good reasons to end the conservatory, which is supposedly temporary crisis.

The Brokeryan Food Factor Aaron Klein claims that opening private capital to the risk of the government’s risk lending and open mortgage loans for buyers for the first time.

Mixed it, however, was the risk of infection in the financial sector.

One of the most important issues is what happens to the government’s guarantee, it costs about $ 250 billion if GSE leave conservatism.

Analysts have warned that the government’s guarantee can increase an entire percentage point at mortgage prices. This will last more than 7.7.7pc of more than 7.7PC of more than 7.7PC more than a 23-year height, which hit 2023.

Mike Kallhun, President of the responsible lending center, says: “It is very important that this [exit] be done at the right time and that’s not that time. “

The administration is wary of risks. Scott Best, the Treasury Secretary, in February, said that the “most important meter” will be on mortgage pace.

On May 27, Trump said:

However, the “alleged” guarantee is not the same as an obvious guarantee that is now in place.

“The lawsuit is not enough,” says one investment banker. “The market is addicted to having that trace on the spot and removing it will create all kinds of instability.”

Without a clear government guarantee, a credit risk attached to Freddi and Fani’s mortgage, which did not exist in the past, says Lembo’s public policy, one of the largest participants in the MBS market.

This will limit who can buy securities with mortgage support. And if less investors are, they will require higher rates, which gives higher costs for households.

Analysts claim that an open guarantee can remain on the spot without a tax payer. Freddie and Fani’s credit books are in good condition. Goldman Sachs analysts note that the need to capture the guarantee is “distant”.

But creating an open guarantee will require the Congress in favor of doing things so that it happens.

The president is apparently studied, in fact, conservatism does not end.

“We learn to actually maintain it in conservatism and take society,” said William Pulant, FHFA Director Wiliam Pult told CNBC.

This can solve the issue of guarantee, but it would also mean the scope of mortgage lending.

It is another big question for the taxpayer how the treasury decides to treat the other shareholders of Fanani and Freddie.

The Preliminary Truth of Trump Social Post sent Freddie Mac and Fani Mey’s shares, which are available as domestic shares, respectively, and 50.6, respectively.

Markets bettered to release speeches from the wedding to the huge profit of private shareholders, which include Bill Akman of the Trump Billionaires Foundation, which is a high defender of plans.

“Trump loves big deals, and it will be the biggest deal in history. I am sure that he will do it, “said Akkman, at the end of last year.

John Paulson, another billionaire Trump’s ally, was also investor in Fanni and Freddie.

But the victory of the shareholders would mean trade results.

In exchange for injection of his crisis funds, the treasury received senior preferred shares in Fani and Freddi. A request that costs $ 348 billion now.

It also effectively belongs to paragraph 79.9 of common shares. In other words, Fannie and Freddie owe the government more than $ 161 billion worth of net value, and the requirements of the treasury come to any other private shareholder.

Therefore, there are expectations that the treasury will write some of its requirements for the transaction to better work in favor of private shareholders and friends.

“If it is done correctly, it can be a victory for taxpayers, and it could really help millions of Americans enter mortgage loans,” says Clin.

“If an error has been made, it can be a mass loot. It can take hundreds of billions of dollars from taxpayers and reward fence funds and speculators. “

After all, no one knows what the president will do. Parent says: “It’s very clear where we are all managed.”

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