The credit union lobby on Tuesday was measured in its comments about the proposed privatization of Fannie Mae and Freddie Mac, even as it seeks to carve out secondary market protections for credit unions.
“While a good first step in the debate, we have some concerns about how the proposal would impact small financial institutions,” said NAFCU president Fred Becker. “Of primary importance to NAFCU is ensuring credit unions continue to have access to the secondary mortgage market in any housing reform proposal and get fair pricing based on the quality of their loans.”
Becker was commenting on a bill introduced yesterday by a group of eight senators. The legislation would wind down Fannie and Freddie over the next five years and replace them with a government-backed mortgage insurer. The bill reportedly would have secondary market protections for community lenders, including credit unions and local banks, but it does not specify what they would be.
“We like aspects of what we see,” said CUNA president Bill Cheney. “This bipartisan legislation is an important first step to creating a secondary mortgage market that focuses on ensuring access to all financial institutions in need a functioning mortgage market, including credit unions.”
Fannie and Freddie have become vital partners for credit unions, buying more than half of their growing volume of mortgages, then packaging them for sale as mortgage-backed securities. The MBS, in turn, are among the few investments credit unions are permitted to make, accounting for huge chunks of credit union investment portfolios. Since the financial crisis, Fannie and Freddie are the only game in the market, now buying 90% of all mortgages sold on the secondary market.
The federal government has been running the two mortgage companies under conservatorship since September 2008 and spent almost $190 billion on a bailout—leading to lawmakers of both parties agitating for a resolution. This bill, sponsored by four Republicans and four Democrats, is seen as an important starting point for serious negotiations on an endgame for Fannie and Freddie.
The bill would create a new
Affordable housing goals for Fannie and Freddie would be eliminated and replaced by a “market access” fund for affordable housing that would be paid for through a user fee.
