WASHINGTON—NAFCU and CUNA emphasized the importance of ensuring credit unions' access to the secondary mortgage market in any reform of the housing finance system in separate letters the trade assoiciatons sent to Senate Banking Committee leaders.
"NAFCU would like to reiterate to the committee the importance of retaining a housing finance system that provides credit unions with unrestricted access to the secondary mortgage market and offers them a fair price for their loans based on their quality," wrote NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt in advance of a Senate Banking Committee hearing Thursday–The Stats of the Housing Finance System After Nine Years of Conservatorship–which will included testimony from FHFA Director Mel Watt.
"This source of liquidity is critical in enabling credit unions to serve the mortgage needs of their over 106 million members across the country."
Hunt also urged that Congress, in any reform effort, put into place safeguards that will prevent discrimination based on institution type or asset size.
"To ensure this type of discrimination does not take place, NAFCU believes there needs to be a heavy focus on fair pricing that reflects loan quality as opposed to standards almost exclusively based on loan volume," Hunt wrote. "Loan quality and underwriting standards are the best way to ensure a healthy and efficient secondary market and a strong housing economy."
Hunt also noted concerns about limiting front-end credit risk transactions and warned against rushing the overall process, which could hurt credit unions' access to the secondary mortgage market.
CUNA's letter emphasized that whatever the outcome of the debate over the housing finance system in this country, "the transition from the current system to any potential new housing finance system must be reasonable and orderly, in order to prevent significant disruption to the housing market which would harm homeowners, potential homebuyers, the credit unions who serve them, and the nation’s housing market as a whole," wrote CUNA President and CEO Jim Nussle.
Nussle also explained that credit unions that elect to sell mortgages into the secondary market do so for a variety of reasons, "but predominantly it is a tool to help them manage long-term interest rate risk. Particularly today, with long-term interest rates at or near historic lows, access to a highly liquid secondary market with relatively low transaction costs is vital for the health of credit union mortgage lending. Credit unions therefore have a deep interest in the structure of the housing finance system going forward."
Nussle added that CUNA supports the creation of an efficient, effective, and fair secondary market with equal access for lenders of all sizes, which adheres to the following principles that include: a neutral third party, equal access, strong oversight and supervision, durability, financial education, predictable and affordable payments and loan limits.