There would be a new government regulator for the MCGEs similar to the role now I played by the Federal Housing Finance Agency.
Further, the council recommends that the a MCGEs be limited to core mortgage products r and not be involved in risky loans products.
Berman says the council is not suggesting the MCGEs would have the kind of affordable-housing goals that were imposed on Fannie and Freddie.
It would be up to the regulator, Berman says, to determine how many MCGEs there should ultimately be.
In defining the core products for the MCGEs, the idea is to have basic conservative products that could withstand "the hundred-year flood," Berman says.
The MCGEs would be privately owned, mono-line institutions focused solely on the mortgage credit guarantee and securitization business.
Unlike today's GSEs, the MCGEs would hold only de minimis portfolios of mortgage assets.
Another key aspect of the plan is that the MCGEs and the federally related securitization guarantee would support only "core" mortgage products, with well-understood, well-documented risk characteristics.
Also, the mission of the MCGEs would be explicitly limited to ensuring liquidity in the core mortgage market through the issuance and guarantee of mortgage-backed securities.
As with the GSEs, the MCGEs would assess, price, mitigate, guarantee and hold capital against mortgage credit risks, but the products covered would be limited to only core mortgage products and subject to double approval by the regulator and the GG, rather than left open to the management of the MCGEs.
The key to the MCGEs is that they take on the initial credit risk at the loan level," says Garry Cipponeri, senior vice president at New York-based Chase.
The MCGEs would hold only de minimis portfolios in support of securitization, rather than large investment portfolios like those of Fannie Mae and Freddie Mac.