WASHINGTON — The Community Home Lenders Association sent a letter to the Senate Banking Committee on Wednesday outlining the group's priorities for housing finance reform.

“It is our understanding that the Committee and its members are engaged in informal discussions and work on developing a comprehensive GSE reform bill, which could lead to Committee consideration this spring,” the trade group said in the letter, which was accompanied by a one-page summary of recommendations.

“In the absence of an available draft bill to consider," the letter said, "CHLA wanted to take the opportunity at this time to provide our views on the essential protections for small lenders that we believe should be included in GSE reform."

Fannie Mae headquarters
CHLA said among its top priorities for housing finance reform are recapitalizing Fannie Mae and Freddie Mac using a “Utility” model and limiting the number of firms that compete with the government-sponsored enterprises. Bloomberg News

The association said its top priorities for housing finance reform include recapitalizing Fannie Mae and Freddie Mac using a “Utility” model and limiting the number of firms that compete with the government-sponsored enterprises.

“Interfacing with multiple charters would be harder for smaller lenders than large lenders,” the group said in the list of recommendations.

The Federal Housing Finance Agency sent a letter to the same banking panel last week saying it believes Fannie and Freddie should be “reincorporated.” But the agency suggested there could be more than two guarantors, but not so many that it would create a competitive race for market share, which could lead to a buildup of risk.

The Community Home Lenders Association also said, “If new charters are permitted, banks, investment firms, and entities with loan origination abilities must not have any ownership interest or influence — to avoid vertical integration.”

Small lenders argue that their large competitors could gain a competitive advantage if they were able to control future mortgage guarantors. The lender group also said a new housing finance system should ban discounts for lenders that originate large volumes of loans.

“Volume discounts, pricing preferences, or any proxies should be prohibited — not just for federal G Fees — but also for fees charged by any new GSE charters or with risk sharing,” the lender association said.

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