More than four years have passed since US housing finance giants Fannie Mae and Freddie Mac were placed in government conservatorship, and granted a last-minute reprieve from insolvency via a steady stream of state-supplied cash. It was a critical move, and one that James Lockhart, who headed the Federal Housing Finance Agency (FHFA) at the time and is now vice-chairman of Invesco subsidiary WL Ross, says “prevented a free-fall” in the mortgage market.
Since then, the financial climate has changed dramatically. Huge players have disappeared from view, markets have plunged and staged some semblance of a recovery and a regulatory tsunami of unprecedented proportions has engulfed the industry. Despite the turmoil surrounding them, however, the sibling government-supported enterprises (GSEs) and the housing finance markets they support have held at something of a deadlock.
