Secondary Mortgage Market Should Meet Needs of Smaller Lenders, CUNA Writes

CUNA and its member credit unions remain committed to working with Congress and the administration to refine and build upon housing finance reform proposals to ensure a strong and sustainable secondary mortgage market that ensures the availability of affordable housing. The House Financial Services Committee conducted a hearing Tuesday reviewing the administration’s housing finance reform plans.

“A robust, smoothly functioning national housing finance system with an efficient, effective and fair secondary market that provides equal access to lenders of all sizes is a key concern for credit unions and the members they serve,” reads CUNA’s letter sent for the hearing’s record. “Credit unions are a small, but increasingly important, source for average working Americans to obtain safe, affordable mortgages. Collectively, credit unions held a total of $432 billion in first mortgages at year-end 2018. This represents 41% of total loans in these institutions – up from 25% of total loans at year-end of 2000.

“Credit union first mortgage originations accounted for nearly 9% of total U.S. first mortgage originations in 2018 – up significantly from 2% of total originations annually prior to the start of the financial crisis,” it adds.

As Congress and the Administration work together to reform the current housing finance system, CUNA believes it is essential for any final reform proposal to prioritize affordable housing by embracing the following principles:

  • Equal accessto lenders of all sizes on an equitable basis;
  • Affordabilitythat 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 transitionto 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 andsupervision 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.