LAS VEGAS — The continued uncertainty surrounding the reform of the secondary mortgage market, combined with what that might mean for credit unions and what they should do, led the way at the American Credit Union Mortgage Association's 15th annual fall conference.
ACUMA welcomed more than 300 credit union executives to the conference as the association geared up to help credit unions find their way to greater relevance in a rapidly shifting mortgage market. This is the largest conference ever in the organization's history, according to ACUMA President Robert Dora.
“We chose to focus on helping credit unions remain relevant to their members mortgage needs because so much is uncertain in the mortgage world right now,” said Dorsa. “The big issue is qualifying borrowers and what it takes to qualify them. Are Fannie and Freddie going away? If so, when? What will a qualified mortgage look like in the future? Is it better to keep a loan on the books and face possible displeasure from NCUA? How can we help our members with the biggest purchase of their lives?”
Those underlying questions were part of why ACUMA chose to lead the conference with the secondary mortgage reform and its potential impact on credit union mortgage operations.
David Reiss, a law professor who specializes in mortgage finance and housing related law, kicked off the session with some news that came as welcome information to at least some in the room. After reviewing some of the history of how and why the secondary mortgage market was created, Reiss told credit union mortgage executives that neither political party appears to be actively pushing to eliminate Fannie Mae or Freddie Mac.
Reiss took care to remind the executives that he had no more of an ability to predict the future than they did, but noted that the Obama administration's range of proposals for what to do about Fannie Mae and Freddie Mac included the idea of retaining them in some form and reforming them. Likewise, Republican members of the House have introduced a wide range of legislation that has also largely called for reforming the two mortgage giants and not for eliminating them.
He identified four main issues that currently stood in the way of lawmakers efforts to move forward on the topic, including potential problems and risks involved in moving from the current Fannie and Freddie to whatever will come next, what the government's role should be in managing risk, whether the 30-year fixed mortgage should have a place in the new system and what role the Federal Housing Administration should have in a new system.
“In a sense, we have a mortgage finance system now that is tremendously more sophisticated than it was when Fannie and Freddie were first charted,” Reiss observed.
ACUMA followed Reiss with a panel of CEOs which took up the questions of the impact of GSE reform on CU mortgage operations.
The panel consisted of Rudy Hanley, CEO of Schools First FCU, in Santa Ana, Calif., and Kirk Kordeleski, CEO of Bethpage FCU, in Bethpage, NY. They were joined by John McKechnie, senior vice president with Total Spectrum, a Washington D.C., government affairs firm. Nader Moghaddam, CEO of Financial Partners CU, moderated the talk.
Since the shape of GSE reform remains unclear, the panelists recommended CUs work more together to help make sure that CUs have sufficient volume to bring to the secondary market to protect their interests.
“What concerns me that if we don't do this, the big banks will simply come to us individually to buy loans at a price that will not be as advantageous to us and pick us off,” Kordeleski observed.
The panel proposed the organization would be necessary if the secondary market reform left a new market that favored bigger financial institutions more over smaller ones.
Several executives expressed skepticism in questions about whether credit unions still felt enough solidarity as credit unions to organize an effort as comprehensive as that would need to be. But Hanley responded that he believed credit unions could still make it happen if they kept their focus on the effort.
Hanley cited a university study that found that organizations that planned their actions did better than those that did not but also found that organizations that didn't stick by their plans did better than those that did.
“What this shows is that that sometimes–and this is one of those times–you need to both plan but also be able to change the plan as the circumstances shift,” Hanley said.
McKechnie encouraged the effort but said that credit unions need to be mindful as they started this effort of the legislative and regulatory fears of aggregated risk that have come to dominate Washington.
“If you do this, you should always remember that you are not working for the good of credit unions but for the good of your 92 million members,” McKechnie said.