A consensus reportedly is emerging within the Obama administration that some type of government guarantee will be needed to keep the struggling mortgage market humming. Even before dealing with the future of Fannie Mae and Freddie Mac, the administration may propose that any federal backing of mortgages be financed by fees charged the lending industry. School of Management finance lecturer Mark Roberts, a former executive vice president at Fleet Bank, says the trick is is figuring what types of loans or mortgage-backed securities should be guaranteed — and how the industry should be charged for government backing.
“I believe we have two issues to deal with here — discovery of the market value of a government guarantee plus discovery of the perceived risk of underlying mortgage debt without guarantees. Until there is a functioning market for unguaranteed mortgage debt, we will not know how to price guarantees.”
Contact Mark Roberts, 617-353-4403, firstname.lastname@example.org