Fannie Mae and Freddie Mac have grown rapidly in debt, mortgage-backed securities (MBS) outstanding and mortgage loan portfolio size. Currently, the Department of Housing and Urban Development (HUD) has a small staff handling the mission regulation of Fannie Mae and Freddie Mac. While the Office of Federal Housing Enterprise Oversight (OFHEO) regulates the GSEs' safety and soundness, it lacks authorities conferred on other financial regulators.

MBA's longstanding view is that the government sponsored enterprises (GSEs) must be regulated effectively. Regulation to assure the financial safety and soundness of the GSEs is critical given their size and importance to the housing finance system and to their investors. Effective mission oversight is equally essential to assure that the GSEs continue to provide liquidity to maintain the vitality and the robust, competitive nature of both the primary and secondary markets. MBA believes that the GSEs' activities should be carefully regulated to ensure that they continue to respond to the needs of the secondary market but do not use their government-sponsored benefits to stray beyond their charter missions and distort the competitive landscape of the primary mortgage market.

MBA believes that the regulator should have strong and flexible authority on par with other financial regulators to require and adjust minimum and risk-based capital and to undertake enforcement where necessary. MBA also believes that all aspects of GSE regulation must be independent and well-funded and must be carried out by an entity with the resources and expertise to evaluate the GSEs' performance, both as financial institutions and as public purpose entities with an essential secondary market housing finance mission.

MBA also supports conferring power on the regulator to address the risks that may arise from each of the GSEs' portfolios and to assure that the portfolios and their use support the GSEs' secondary market mission. However, because markets are dynamic, the GSEs need flexibility to adjust their portfolios to changing conditions and marketplace needs.

While MBA does not oppose modifications to the law to require registration of the GSEs' stock and debt, it strongly supports continued exemption of mortgage backed securities (MBS) from the registration requirements. MBS registration could hinder the to-be-announced (TBA) MBS market and increase costs to mortgage borrowers.

MBA will continue to work with all Members of Congress and the Administration to support enactment of comprehensive GSE reform legislation as soon as possible.