A housing finance bill introduced by Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., provides secondary market access for small lenders via a cash window and the Federal Home Loan Banks.
The bipartisan bill calls for winding down Fannie Mae and Freddie Mac which currently purchase loans from lenders for cash.
To replace the GSEs’ cash window, the bill calls for the creation of a “mutual securitization company” that would purchase single-family loans from member community banks, credit unions and
This cash window would allow community banks to sell their loans and retain the servicing, according to the Independent Community Bankers of America. “Overall, we are very pleased with inclusion and the level of detail that was given to ensure that community banks have access to the secondary market and the cash window,” said ICBA chief lobbyist Paul Merski.
Small depositories with less than $15 billion in assets and nonbank mortgage companies with a minimum net worth of $2.5 million could be members of this securitization company.
The Corker-Warner bill lays out a plan for creating a new secondary market regime that replaces the GSEs with a Federal Mortgage Insurance Corp. that provides a federal backstop. The GSE reform bill directs the FMIC to establish the mutual securitization company and a securitization platform for the Federal Home Loan Banks, which could be MBS issuers.
Many FHLBs currently purchase single-family loans from member institutions but they are not allowed to securitize the mortgages.
Co-sponsors of the bill “worked very, very hard to make sure that our community lenders” have access to the secondary mortgage market, according to Sen. Mike Johanns, R-Neb. “In a state like Nebraska, this is enormously important,” he said at a press conference Tuesday.
As the chairman of the Senate Banking securities subcommittee, Sen. Jon Tester, D-Mont., said he worked hard to advance the GSE reform bill. “We are hopefully going to encourage the full committee to do a markup in the fall so we can get this bill to the [Senate] floor” this year.
In response to the introduction of the Corker-Warner bill, Senate Banking Committee chairman Tim Johnson, D-S.D., stressed that Federal Housing Administration reform needs to be addressed first.
“I plan to turn the committee’s attention to broader housing finance reform after we address the more timely issue of FHA solvency,” Johnson said.
