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Obama Declares GSE Model "Dead", Increases Down Payment Requirements

"The GSE model is dead," an Obama administration official told reporters as the Treasury Department released a long-awaited report on options to revamp housing reform. " As Reuters reports: "The housing "white paper" presents three different visions for replacing mortgage finance giants Fannie Mae and Freddie Mac, which are set to be slowly wound down. The paper does not make a single recommendation, but broadly outlines alternative possibilities to reduce the government's role in the mortgage market. That strategy aims to "open a dialogue with Republicans that would lead to a consensus outcome within a couple of years," said Michael Barr, a professor at the University of Michigan and a former Treasury Department official." In other words, just like the findings of the president's commission on the deficit, this paper will be glossed over by a bunch of beltway politicians and then promptly forgotten as whatever the banking lobby wishes to happen behind the scenes, happens. As for actionable proposals, the paper core recommendation is "increased guarantee fee pricing, increased down payment requirements, and other measures – to bring private capital back into the mortgage market and reduce taxpayer risk."

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