Council on Ensuring Mortgage Liquidity releases proposed framework.

The group of secondary market experts appointed by the Mortgage Bankers Association (MBA) to serve on the Council on Ensuring Mortgage Liquidity has released a paper containing recommendations for a proposed framework for the secondary market. The paper, titled MBA's Recommendations for the Future Government Role in the Core Secondary Mortgage Market, was released in early September.

The 23-member council is chaired by Michael D. Berman, CMB, president and chief executive officer of CW-Capital, Needham, Massachusetts. The centerpiece of the recommendations is "the creation of a new line of mortgage-backed securities." Each security, according to an MBA press release, would have two components. One would be a loan-level guarantee provided by a government-chartered and regulated but privately owned mortgage credit-guarantor entity. And the other component would be a security-level federal government-guaranteed wrap. The wrap would provide an explicit government guarantee focused on the credit risk of the mortgage securities, similar to what's provided on a Ginnie Mae security.

In releasing the paper, Berman said, "It's now been more than two years since the secondary mortgage market collapsed. Rebuilding the secondary market is critical to restoring liquidity and confidence. The government has an important, limited role to play to ensure a stable flow of funds for mortgages."

The latest paper is the third in a series published by the Council on Ensuring Mortgage Liquidity. The other reports and the new paper can be found at www.mortgagebankers.org/ceml.