He notes that there are so many government agencies that have a vested interest in what would happen with the GSEs that he believes many different experts will be involved in the process.
“They’re likely going to tap into expertise across the government,” Fratantoni said. “At the Treasury and FHFA, at the Fed, some of the other financial regulatory agencies, and the SEC, because it really touches on all those spots.”
Avoiding another 2023
If there is a disruption with Fannie and Freddie during this process, some loans may end up going to other places, like FHA and Ginnie Mae. However, other loans may be kept on the primary market, which Fratantoni believes will draw extra attention from bank regulators.
“I mentioned the SEC, because, if there’s some sort of disruption in the conventional market, you might see more of a need to go to the private label portion of the market,” he said. “And if more winds up on bank balance sheets, bank regulators are going to have a view on that and particularly remembering back to 2023 and the challenges with First Republic and Silicon Valley Bank.”
In 2023, two major banks failed. Silicon Valley Bank failed on March 10, 2023. It was the third-largest bank failure in United States history. First Republic Bank followed on May 1, 2023.