"Nobody wants to be the bank that has their customer's information pasted all over some website just because a borrower got a loan with them," says Chris Killian.
"Nobody wants to be the bank that has their customer's information pasted all over some website just because a borrower got a loan with them," says Chris Killian.

Passage of housing finance reform is absolutely essential if policymakers want to see the development of a private-label securitization market again, according to industry lobbyists.

Major players like Wells Fargo and BlackRock need more certainty before they will commit capital to a private-label mortgage-backed securities market, said Securities Industry and Financial Markets Association managing director Christian Killian.

"They need to be able to set a long term plan," he said at a National Association for Business Economics conference Monday. "When you don’t know what the market is going to look like in a year or two years from now, it is hard to do that."

Mortgage Bankers Association president and chief executive David Stevens also stressed that Congress needs to deal with Fannie Mae and Freddie Mac before a private-label MBS market can take root.

"Who is going to want to create market when you have these huge powerful institutions that have preferred access to capital taking up such a large swath of the mortgage market?" Stevens said at the conference.

The trade group executives' comments come as Senate Banking Committee leaders are expected to release a housing finance reform bill in the next few weeks.

The Federal Housing Finance Agency's strategy of raising Fannie and Freddie guarantee fees to entice private capital back into the secondary mortgage market isn’t working, Killian and Stevens agreed.

Major banks are making loans to high net worth borrowers with high credit scores and large downpayments and either putting the loans on their balance sheets or selling them as whole loans.

Yet lenders are still relying on Fannie and Freddie loans to serve first-time homebuyers and traditional borrowers, Stevens said. "We are actually seeing significant year-over-year declines in low-downpayment purchase applications simply because of these price increases."

The g-fee hikes are not creating alternatives for low-downpayment borrowers, he said. "It is just raising rates for everyone."

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