The Future of the Private Label Securities Market

Abstract

The PLS market, like all markets, cycles from greed to fear, from boom to bust. The mortgage market is still in the fear part of the cycle and recent government interventions in it have, undoubtedly, added to that fear. In recent days, there has been a lot of industry pushback against the government’s approach, including threats to pull out of various sectors. But the government should not chart its course based on today’s news reports. Rather, it should identify fundamentals and stick to them. In particular, its regulatory approach should reflect an attempt to align incentives of market actors with government policies regarding appropriate underwriting and sustainable access to credit. The market will adapt to these constraints. These constraints should then help the market remain healthy throughout the entire business cycle.

Keywords: Private Label Securities, PLS, Department of Treasury, FHFA, Federal Housing Finance Agency, housing finance, mortgage market, guaranteed mortgage, liquidity, affordable housing, first-time homebuyers, CRA, Community Reinvestment Act, Fair Housing Act, Qualified Mortgage, Qualified Residential Mortg