CUNA supports the creation of an efficient, effective and fair secondary market with equal access for lenders of all sizes, it wrote to the House Financial Services Committee Thursday. The letter follows up a joint letter CUNA sent Wednesday to the committee for its hearing on government-sponsored entity (GSE) reform.

“Credit unions are significant participants in the secondary mortgage market. Particularly when rates are low and rising, and because they have fewer tools to mitigate interest rate risk, credit unions today rely on a robust secondary mortgage market to manage their balance sheets and promote safety and soundness in the housing finance sector,” the letter reads. “Access to a highly liquid secondary market with relatively low transaction costs is vital for the health of credit union mortgage lending and the housing market overall.”

CUNA believes a secondary market must adhere to the following principles:

• There must be a neutral third party in the secondary market, with its sole role as a conduit to the secondary market;
• The secondary market must be open to lenders of all sizes on an equitable basis;
• The entities providing secondary market services must be subject to appropriate regulatory and supervisory oversight to ensure safety and soundness by ensuring accountability, effective corporate governance and preventing future fraud;
• Any new system must ensure mortgage loans will continue to be made to qualified borrowers even in troubled economic times;
• An emphasis on consumer education and counseling as a means to ensure that borrowers receive appropriate mortgage loans;
• Consumer access to a variety of products that provide for predictable, affordable mortgage payments to qualified borrowers;
• Application of reasonable conforming loan limits that adequately take into consideration local real estate prices in higher cost areas;
• Government support for affordable housing should be a function separate from the responsibilities of the secondary market entities;
• Credit unions should continue to be afforded the opportunity to retain or sell the right to service their members’ mortgages, at the sole discretion of the credit union, regardless of whether that member’s loan is held in portfolio or sold into the secondary market; and
• 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.