Community banks have a problem with the Bipartisan Housing Commission’s plan for restructuring the secondary mortgage market. They claim it would allow the large banks to dominate the securitization market.
As proposed, the
Currently, small and midsize players can sell individual loans to Fannie Mae and Freddie Mac for cash and retain the servicing if they want. They don’t have to depend on large banks to buy their loans.
The BHC plan calls for winding down the GSEs and creating a new “public guarantor” that would operate like Ginnie Mae and deal just with approved MBS issuers. (There were 400 Ginnie-approved issuers at the end of 2012.)
Commission co-chairman Mel Martinez testified Tuesday that access should be open to all lenders. “Ginnie Mae’s success in empowering smaller institutions to participate in its program is instructive here,” the former senator and HUD secretary told the Senate Banking Committee.
But ICBA maintains the BHC proposal would increase the market power of the large banks. “Any reform proposal should provide equal and direct access on a loan-by-loan basis for community banks,” Haynie told NMN.
Other trade groups have concerns about the public guarantor providing federal guarantees for large lenders that compete directly with small lenders.
“Lenders never wanted Fannie and Freddie to get into the origination business,” one source said. “Why would they want Wells Fargo or Bank of America to get into the secondary market business?”
