WASHINGTON—CUNA and NAFCU are asking the Federal Housing Finance Agency (FHFA) to provide greater clarity around GSE guarantee fee pricing, and to set lower fee prices.
The trade associations each wrote a letter to the agency in response to its request for information (RFI) on the government sponsored enterprises (GSEs) Enterprise Regulatory Capital Framework (ECRF) and single-family pricing framework.
CUNA said it is urging the FHFA to provide more data to the public on how the application of its Enterprise Regulatory Capital Framework (ECRF) will affect guarantee fees before making any policy decisions, the trade association reported.
‘Safety & Soundness Issue’
“America’s credit unions depend on the liquidity, stability, and affordability that the Enterprises provide. The guarantee fees set by the Enterprises, therefore, affect credit unions and their ability to provide their members with affordable mortgage credit,” the comments read. “Because of the wide-reaching effects that pricing decisions like setting guarantee fees can have on the safety and soundness of the Enterprises and equitable and sustainable access to mortgage credit, transparency and public engagement is vital to ensure that the Enterprises can continue to satisfy the purposes for which they were created.
CUNA also called on the FHFA to undertake and release an analysis of the pricing impacts of the ECRF before moving forward.
“More transparency is also needed with respect to the targeted returns that FHFA has set for the Enterprises, and CUNA encourages FHFA to furnish more information about the Enterprises’ single-family targeted returns,” the letter reads. “The targeted returns on capital are used to mitigate against the underpricing of risk.”
NAFCU’s Comment
In NAFCU’s letter, Senior Regulatory Affairs Counsel Amanda Smith called for lower guarantee fees for credit unions selling loans to the GSEs and noted the association’s support for eliminating fees for certain borrowers.
However, Smith urged the agency to implement a discount to the base risk weight for low-risk mortgages that credit unions originate, allowing the cost of credit to remain low. She also expressed NAFCU’s opposition to continuing to tie the GSEs upfront guarantee fees to the ERCF.
“The capital requirements under the ERCF have increased by approximately 70% in recent years and a proportionate increase in guarantee fees would make the GSEs a less competitive option compared to private mortgage financing options,” Smith wrote. “While guarantee fees have stayed relatively flat, this has resulted in below-market returns for GSE-held mortgages and raised concerns about the likelihood of rising rates."
Reinstate ‘Seasoned’ Transactions
Smith also called on the FHFA to reinstate “seasoned” transactions to allow credit unions to better handle liquidity and interest rate risk. She noted that “funds from a seasoned transaction enable lenders to reinvest in new mortgage loans to their communities, including affordable housing loans and loans intended to serve underserved communities.”
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