GSE reforms called for to boost PLS

Author: Edward Price | Published: 4 Jan 2016

Counsel and industry are pushing to boost private label securities (PLS) as the reform of government sponsored enterprises (GSEs) rises up the regulatory agenda. But uncertainty surrounds the best manner in which to do it. 

Freddie Mac and Fannie Mae play critical roles in the US market for residential mortgage backed securities (RMBS). But their presence in the RMBS market suppresses the private mortgage market.

"Right now, PLS can’t compete with Federal Housing Administration (FHA) loans or the GSEs," said Christopher Killian, managing director at Securities Industry and Financial Markets Association (Sifma).

For Killian, however, GSE reform is not something to be rushed."What do you do to get private label securities going, when that side of the market is smaller than it should be?," he said.

Lewis Cohen, Hogan Lovells "Do you pull back on government involvement in order to stimulate the private label side, or...