Why GSE reform might look different in a second Trump term

There's been speculation Mark Calabria could return to once again lead the government-sponsored enterprises' regulator and conservator if a second Trump term emerges, but analysts are now saying it could be someone else.

"I don't think Director Calabria would return, but I think somebody in his mold might," Isaac Boltansky, managing director at BTIG, said while speaking on a GSE reform panel at the Mortgage Bankers Association's Secondary and Capital Markets Conference in New York.

When asked why, Boltansky said, "I think he wants another job."

To be sure, Calabria has confirmed he's open to coming back to head the Federal Housing Finance Agency if asked.

When reached for comment on Thursday, Calabria largely reiterated that stance, which he took while speaking at a Commercial Real Estate Finance Council event earlier this year. He added that he would defer to the President as to where he could best serve.

"There are certainly others who could finish the work I began at FHFA," he said in an email.

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Boltansky, who also is director of policy research at BTIG, and Jaret Seiberg, managing director and financial policy analyst at TD Cowen, speculated that Jonathan McKernan, who is currently a director on the Federal Deposit Insurance Corp.'s board, might be a more likely candidate.

McKernan previously served as senior counsel for policy at the FHFA starting late in the Trump administration. Prior to that, he had been a senior policy advisor to the Treasury and worked on its Housing Reform Plan. He could not immediately be reached for comment at deadline.

Treasury agreements around the GSEs' move into conservatorship after the Great Recession's housing crash make the former's involvement essential in any reform that would free them from it, something the Trump administration got close to but has been complicated.

Since the Great Recession, Fannie Mae and Freddie Mac's purchases of mortgages from private lenders have constituted a significant part of the market, and the contracts involving their pre-crisis investors and Treasury are complex in structure. They also have legal entanglements.

Housing finance officials under the current administration have taken some steps to shore up the enterprises' finances in preparation for GSE reform and have voiced a need for it, but Boltansky indicated Treasury interest has been lacking, echoing an opinion Calabria has had.

(Under Trump, Treasury Secretary Steve Mnuchin was aligned with Calabria much of the time. Mnuchin told Bloomberg that he would consider taking a position in a second Trump administration if called upon.)

Even a second Trump administration might not move that fast on GSE reform because the expiration of tax cuts will likely be more of a priority, the analysts said, echoing statements Calabria previously has made.

There are mixed opinions within the lending community as to whether or how GSE reform's completion would or could be to mortgage companies' advantage, and that plays into why an administration may move slowly on it, at least initially.

A promise to release Fannie and Freddie is not necessarily going to sway voters, Seiberg said.

"You are, however, going to lose an election if somehow or other you mess up the housing finance system by freeing Fannie and Freddie," he added, indicating that a poor follow-though could jeopardize a party's standing in future political contests.