CUNA: Access to secondary market vital for CU mortgage lending
Access to a liquid secondary mortgage market is vital to the health of credit union mortgage lending, CUNA wrote to the House Financial Services Committee Thursday. CUNA sent its letter for the record of a committee hearing on the Bipartisan Housing Reform Act of 2018.
“Credit unions that sell mortgages into the secondary market do so for a variety of reasons, but often it is a tool to help them manage long term interest rate risk to ensure their sustained ability to meet their members’ mortgage lending and other financial needs,” the letter reads. “Particularly today, with long term interest rates at or near historic lows but expected to rise, access to a liquid secondary market with relatively low transaction costs is vital for the health of credit union mortgage lending.”
CUNA’s letter notes that credit unions are increasingly active participants in the secondary mortgage market, with more than 35% of mortgage lending credit unions selling $50 billion in loans into the secondary market, up from 15% of mortgage lending credit unions selling $4.5 billion in loans into the secondary market in 1997.
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.