Legislators working on bills to wind down Fannie Mae and Freddie Mac and reform the housing finance system need to ensure that small lenders don’t lose their access to the secondary market, according to the Mortgage Bankers Association.
Small banks and mortgage banking companies can currently sell individual loans to Fannie and Freddie for cash. And these “cash windows” are unlikely to be replaced under
The MBA wants to ensure that GSE reforms will enable small lenders to sell single loans or small pools into securitizations once the new securitization system is operational.
In the interim, the GSE “cash window needs to remain in place until an operable single-loan execution process is up and running,” according to an MBA concept paper.
Under the new system, smaller originators should continue to have the option of quick funding. “Today, GSE cash windows provide daily funding. In the new system, there should be some consideration to moving to more frequent settlement dates to permit quicker funding,” the MBA says.
Small and community-based lenders also need the option to sell their loans and retain the servicing.
“It is critical that as policymakers transition away from Freddie Mac and Fannie Mae, a competitive environment is created so that smaller lenders are able to be effective in the secondary market,” said MBA chairman Debra Still.
