Thread by @CarlosVignote

THE ARTICLE ADVOCATES FOR KEEPING THE CHARTER
FnF arent't liquidity providers.That's the #Fed.FnF buy mortgages for a guaranty mortgage securitization biz.
Cross-subsidy:even the authors claim that it's a common feature among insurers."Now,considerably less".This is...#Fanniegate

https://twitter.com/Markzandi/status/1517236390861418497

because they realized that all the borrowers authorized in the Charter pose similar risk at origination, since the Charter's requirement is just LTV<80%.
They claim that the UST backup in the Charter,to "ensure their solvency", is a taxpayer subsidy, ignoring that the true backup

of FnF is their Capital Reserve ($252b as of Dec 2021 w/ the secret plan),as 4th layer of protection. The other 3 are:

https://twitter.com/CarlosVignote/status/1430184248259055620?t=2g1H280D_6H-VMHNr-Fz1g&s=19

-The Charter's Credit Enhancement clause: borrower bears losses(max 80%LTV: PMI or down payment),...
-Collateral
-Loan Loss Reserve
So,the

UST backup, is the 5th layer of protection of FnF(pointless w/ $252b C.C.). The investors focus on the 5th one when the other 4 are nonexistent or small, like occurred prior 2009 (illegal toxic PLMBs,etc). This is why the MBS investors require a low yield.
The Charter can be read

as promoting a low g-fee, but also subsidy is when the risk isn't properly compensated.
Prior 2009, FnF had both. Then,@FHFA ordered loan-level pricing adjustments, to better reflect the loan-level credit risk. Now, they don't subsidize the g-fee (x2 since 2008) across the board,

but the cross-subsidy still exists from a higher level. This way, the credit risk is better compensated than before.
The g-fee hike was meant to compete w/ the fully private sector on a level playing field.But the authors,now that it's higher,want to increase cross-subsidization.

BOTTOM LINE
Article paid by Mnuchin/Pagliara that want Utility Model for secured deals. Option 3:original Charter,but expanding cross subsidization.
My view:The Charter
It aimed to provide mortgage credit throughout the Nation
"Earn less" is a common cross-subsidy
Pointless today

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