WASHINGTON (3/18/14)--With the release of the Johnson-Crapo housing finance reform bill over the weekend, the Credit Union National Association has confirmed an important modification from an earlier draft bill. The cap for membership in an mutual securitization company was drastically increased , as recommended by CUNA in testimony last November and in meetings with legislative staff on Capitol Hill.
The Johnson-Crapo draft bill is lengthy--425 pages of reforms. It, of course, details the bipartisan agreement announced last week by Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) on how to overhaul the housing finance market, as well as on what to do with government-owned Fannie Mae and Freddie Mac. The discussion has both languished and been on the front burner for five years, and now some traction has been found.
CUNA supports housing finance reform but has insisted throughout discussions that credit unions must continue to have unfettered access to the secondary market under any revised system.
CUNA backed an idea found in an earlier bill, S. 1217, which proposed a mutual securitization company to provide credit unions and other smaller lenders access to securitizing their mortgages, access currently provided by Fannie Mae and Freddie Mac. However, CUNA had criticized a $15 billion-in-assets cap for participation in the mutual to be far too low.
As CUNA Chief Economist Bill Hampel emphasized during one of the hearings in which CUNA was asked to testify on reforms, "We believe that this cap is far too low, and would suggest that lenders of almost any size should be able to use the mutual, so long as they do not themselves issue covered securities."
"Restricting the mutual to serving just smaller lenders would preclude achieving necessary scale economies," he said, and added, "Indeed, it would be desirable for the mutual to be among the largest if not the largest issuer of covered securities. "
The Johnson-Crapo bill raises the proposed ceiling to $500 billion in assets--a half-trillion dollars--large enough to serve as a robust vehicle to the secondary market for credit unions.
Overall, CUNA has applauded Senate Banking Committee leadership for creating a bipartisan housing finance reform bill--one that builds on the work of Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.), and "takes significant steps to ensure that credit unions will continue to have access to a functioning, well-regulated, well-capitalized secondary mortgage market."
CUNA Senior Vice President of Legislative Affairs Ryan Donovan has noted, "While we have only just begun to review the legislative language, based on the information we have received so far, we believe many of the suggestions that we made in our testimony have been incorporated, and we are hopeful this will be a bill that credit unions can strongly support."