WASHINGTON–NAFCU’s Carrie Hunt testified before a Senate Committee here that housing reform is of the “utmost importance” and credit unions must have guaranteed access to the secondary mortgage market and that access must be fair.
Hunt, EVP-government affairs and general counsel, told the Senate Banking Committee credit unions work to assist borrowers in achieving home ownership, using both Fannie Mae and Freddie Mac to sell and securitize loans.
Moreover, some CUs are also approved Ginnie Mae issuers, and many are active users of the Federal Home Loan Bank system for liquidity.
NAFCU has developed a set of principles it wants Congress to use in considering any housing reform effort, Hunt said, including:
- Credit unions must have guaranteed access to the secondary mortgage market and that access must be fair. “We do not support a pricing structure based on loan volume, institution asset size, or any other issue that will put our member-owners at a disadvantage,” said Hunt. “Credit unions must be able to participate on a level playing field and have access to pricing that is focused on quality not quantity.”
- An explicit government guarantee should be part of any reform effort, and that while the current system isn’t perfect, it is “working” for credit unions. “Ultimately, we believe that narrowly tailored— rather than broad— reforms to the housing system will likely assist our members the most,” she said.
- NAFCU supports maintaining a cash window at the guarantors, creating an explicit government guarantee; and prohibiting volume-based discounts on pricing.
- NAFCU also supports “appropriate regulatory oversight of the secondary market but one that allows some flexibility outside of statutory constraints. For example, Congress should not be mandating requirements, such as a minimum down payment percentage. This is a requirement that may be put in place by the regulator and should be flexible to account for economic fluctuations in the housing market.”
- NAFCU supports the need for a single independent regulator that can provide stability and confidence in the market. “We have seen those benefits with Fannie and Freddie in conservatorship. We appreciate the outline’s focus on enhancing the FHFA as a strong regulator with the authority to establish standards for leverage ratios, concentration risk, and capital requirements. Additionally, the outline permits the FHFA to approve guarantor pricing, which provides an essential check on the multi-guarantor model should that model be ultimately adopted.”
- Relative to the multi-guarantor model, NAFCU said it supports competition in general, but under the outline a large number of guarantors could enter the market, a situation that could be fraught with increased overall risk and cost to the system as guarantors jockey for market share. “In addition, all of the guarantors would likely be subject to the same financial stresses during an economic downturn and the benefits of multiple guarantors would be lost.”
Other Points Raised
Hunt said NAFCU also has “general concerns about overall costs and workability, including the transition, to any new housing finance system. Credit unions have not only invested in the infrastructure and software to interface with the existing GSEs, but have worked to establish strong business relationships with them. These relationships have been built up over years and are hard to replicate overnight.”
Hunt told the committee credit unions also value the ability to maintain servicing rights on their loans, and are optimistic about the potential benefits of the Common Securitization Platform and Uniform MBS. “Both should be maintained in a future housing finance system,” Hunt said.
Lastly, Hunt said NAFCU supports mechanisms to help create affordable housing, including the existing duty to serve requirements.
Hunt’s full statement to the committee can be found here.
Also Testifying
Joining Hunt in testifying before the Committee were Michael Bright, president and CEO of The Structured Finance Industry Group;Robert D. Broeksmit, president and CEO of the Mortgage Bankers Association;Lindsey Johnson, president of U.S. Mortgage Insurers; Vince Malta, president-elect of the National Association of Realtors, and Michael D. Calhoun, president of the Center for Responsible Lending.