If the Common Securitization Platform is turned over to a private, nonprofit entity, it could be used to give large banks control over the real estate finance process, warned an industry trade group.
In 2015, Sen. Richard Shelby, R-Ala., introduced a bill that included language calling on the Federal Housing Finance Agency to transition the CSP to private ownership. That measure died, but the provision was later included in the Senate's version of a Treasury appropriations bill, before being stripped out of the final version.
The CSP is jointly owned by Fannie Mae and Freddie Mac and will serve as a standard mechanism for mortgage-backed securities issued by the government-sponsored enterprises. Both Senate bills called on the potential new owner to expand the CSP by allowing private companies to issue their own MBS.
The Community Home Lenders Association supports the creation of the CSP, but not its privatization out of concerns that it would make it more difficult for small and midsize mortgage companies to compete with large banks.
With a privatized CSP, the big banks will use "their securitization muscle and expertise to control the GSE origination market" and cut out the independent mortgage banker, said Scott Olson, the CHLA's executive director.
Olson is concerned that Congress may include similar language in one of the catch-all bills that typically get passed at the end of a session. The CHLA and other organizations, including the NAACP, sent a letter to Congress on Sept. 19, expressing their concerns.
"If [Congress] takes away the Common Securitization Platform, one of the things we point out in the letter is that it seems to be tilting the ultimate debate on GSE reform in favor of getting rid of Fannie and Freddie and turning the process of securitizing loans over to the Wall Street banks," said Olson.
The two failed bills also included a provision on upfront risk-sharing that the CHLA also opposes, in part because the group sees the effort as a piecemeal approach to housing finance reform.
"We thought it was important to send a clear message that this has not been debated and it is not noncontroversial," he said, adding the letter pointed out the issues "are being dealt with on a very detailed and thoughtful manner by the FHFA."