GSE Change in Status?

Will the status of the GSEs ever change? It is questionable whether any change can be accomplished in a midterm election year. We have seen some action in 2025. There is a strong concern whether the private residential mortgage market has the capacity to pick up any reduction in the market percentage currently handled by the GSEs. The private market for securitization of residential mortgage loan (“RMBS”) is only about 20% of its pre-crisis size. SEC registered RMBS is non-existent today, likely as a result of an ABS rule change in 2014 that requires disclosure of up to 270 data point for every mortgage loan. This disclosure is required at the time of issuance and periodically thereafter for the life of the securitization. There has not been a single SEC registered RMBS since this requirement became effective. So the private market today in RMBS consists solely of private placements, for which the market is more restrictive.  

Relying on this more restrictive market to take up the slack caused by a reduced GSE footprint would seem unlikely. Without the more robust SEC registered RMBS market functioning, reducing the GSE footprint would seem risky; any significant impairment of the ability to finance single family homes would adversely affect the economy and be politically fatal.

The new administration at the SEC has taken a step in resolving this dilemma with the publication of a concept release seeking comment generally on the Commission’s ABS rule and particularly on the loan level data requirements. See Release 33-11391, Sept. 26, 2025. The comment period closed in early December, so the comments are now available online. If the SEC is able to find a disclosure solution acceptable to the market, it may be able to restart the SEC registered RMBS market. Only then would change in the status of the GSEs be possible.