The paper, "A Guarantee for the Guarantee: Two Proposals to Ensure that the Future Secondary Mortgage Market Serves All Creditworthy Borrowers," comes as momentum to overhaul Fannie Mae and Freddie Mac has surged in Washington, with legislation pending in both the House and Senate.
The report lays out a so-called status quo access model that would carry over existing affordable housing goals used by the government-sponsored enterprises, along with a second "incentive model" that would likely prove more politically palatable than maintaining the existing goals. The second model would apply a variable cost paid by secondary market entities based on their commitment to purchase and securitize a diverse supply of mortgages to groups with "unmet housing needs." The sliding fee would be related to either the cost of a government guarantee for the market or an affordable housing assessment.
"Little, if any, detailed attention has been paid to addressing the need to provide affordable, conventional mortgage credit to the full spectrum of America's creditworthy borrowers—including millenials, working-class people, rural residents and minorities," the paper says. "The National Community Reinvestment Coalition believes that this omission renders the current proposals lacking."
It adds: "The shape of the secondary market will play a significant role in dictating access to mortgage credit for almost every household in this country. Establishing an affirmative obligation to serve the full spectrum of creditworthy borrowers with conventional lending is an important step for ensuring equal opportunity for consumers and accountability for private financial institutions that seek a federal guarantee."