Officials Mull Plan for Risk-Sharing Between GSEs and Private Investors

The Obama administration is looking into ways to support greater private sector involvement in the secondary market for home mortgages.

Officials are weighing a proposal that would allow ""Fannie Mae"":http://www.fanniemae.com and ""Freddie Mac"":http://www.freddiemac.com to sell off portions of their mortgage-backed securities (MBS) to private investors. According to[IMAGE] [COLUMN_BREAK]

the _Wall Street Journal_, these MBS carve-outs would not carry a federal guarantee but would pay a higher interest rate.

Today's mortgage market is dependent on Fannie Mae and Freddie Mac, who along with the ""Federal Housing Administration"":http://www.fha.gov, fund 90 percent of all new mortgages.

The _Journal_ says a small pilot program could be rolled out as early as next year to test private investors' willingness to pick up some of the slack as the government pulls back its role in the market.

The acting director of the GSEs' conservator, the ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA) alluded to the possibility of shared-risk securities offerings in a speech last month.

FHFA's Edward DeMarco said there are ""numerous securities structures that could be considered,"" and used the opportunity to criticize policymakers for their lack of action in reducing Fannie and Freddie's dominance in the U.S. housing market.