Community lenders essential to future secondary mortgage market

September 10, 2019

Community lenders must be at the core of the future secondary mortgage market, CUNA wrote to the Senate Banking Committee Tuesday for its hearing on the housing finance reform. CUNA’s letter outlines features that must be present in a future system to ensure a strong and sustainable secondary market.

“Each of these features—pricing and term parity, an obligation to serve all lenders, and the simplicity of a cash commitment window—are crucial components of any secondary market housing finance reform proposal that honestly seeks to ensure community lenders can compete and offer consumers an alternative to big banks and huge mortgage finance companies,” the letter reads. “Given the increasing market share that credit unions have gained in the primary mortgage market over the years, it is clear that our member owners want to be able to count on their community lender when it comes to buying a home.”

CUNA believes, as Congress and the administration work to reform the current housing finance system, the following priorities must be prioritized:

  • Equal access to lenders of all sizes on an equitable basis;
  • Affordability that incudes recognition of the fact that smaller lenders, such as credit unions, often meet mortgage needs that banks are unwilling or unable to address in rural and working-class communities that require greater flexibility in underwriting requirements and weigh against mandatory minimum down payments;
  • A reasonable and orderly transition to a new housing finance system. Accordingly, efforts to transfer guarantee oversight authority to entities, such as Ginnie Mae, must honestly assess and plan for potential frustrations if not acknowledged, addressed, and corrected well in advance of any transition;
  • Strong oversight and supervision to ensure the safety and soundness of secondary market entities;
  • Durability, by including an explicit federally insured or guaranteed component to ensure that, even in troubled economic times, the secondary mortgage market continues to exist; and
  • Preserving what works, such as cost-effective and member-oriented credit union mortgage servicing options, emphasizing consumer education and home-purchase counseling, and applying reasonable conforming loan limits that adequately consider local real estate expenses in higher cost areas.

CUNA also notes that the future secondary mortgage market must “build upon and strengthen the existing partnerships between credit unions, guarantors, and Federal Home Loan Banks in ensuring access to responsible and affordable mortgage credit for millions of credit union members.”

The administration recently released its proposal for housing finance reform, which along with the blueprint released by Senate Banking Committee Chair Mike Crapo (R-Idaho), CUNA said are “important first steps” in the process.

“CUNA and our credit union members are committed to working with both Congress and the Administration to refine and build upon those proposals to ensure that they accomplish a strong and sustainable secondary mortgage market for the future,” the letter reads.