Federal Housing Finance Agency is working on a proposal that will see the creation of single-mortgage backed security. The proposal seeks to protect current homeowners from high mortgage rates that have remained a point of concern for years. The proposal also seeks to protect Federal Home Loan Mortgage Corp (OTCBB:FMCC) from being used as a government cash cow.
Push For Lower Mortgage Rates
The proposal seeks to accord homeowners lower transaction costs and mortgage rates. Federal Housing Finance Agency is looking to create a framework that will make lending more efficient allowing people to refinance their mortgages without the normal financial constraints and concerns
Under the new proposal, taxpayers will be protected from any investments that Federal Home Loan Mortgage Corp (OTCBB:FMCC) pursues, which may pose risks as the industry remains volatile and risky. The proposal will also minimize the amount that Freddie Mac has to pay to the department of treasury in the form of dividends.
Federal Home Loan Mortgage Corp (OTCBB:FMCC) has been unable to generate a good amount of shareholder value as it continues to send most of its profits to the Treasury. The Senate is pushing to strengthen the corporation, a move that seeks to prohibit certain fees from being imposed. Congress is in the process of strengthening the mortgage, having felt the full effects of the financial crisis in 2008.
The new reforms being spearheaded by Alabama Republican Senator Richard Shelby seek to initiate some changes to bank reform laws, enacted during the financial crisis. The senator is also looking to stop the government from offloading its preferred stock in the company without Congress consent.
However, the bill faces a rocky path to approval as Democrats continue to maintain a firm stance affirming that the bill ought to contain provisions that protect smaller banks.