The Senate Banking, Housing and Urban Affairs Committee plans toconduct a hearing this afternoon regarding housing finance reformthat will focus on private investments.

“Returning Private Capital to Mortgage Markets: A Fundamentalfor Housing Finance Reform” will call policy experts and academicsto testify, including Mark A. Willis, resident research fellow atthe New York University Center for Real Estate and Urban Policy.Willis, a former New York Federal Reserve economist and JPMorganChase executive, recommends first restoring private capital to jumbo mortgage funding, and moving moreslowly using private, risk-based capital to fund the remainder ofthe secondary market.

He cautioned against turning the secondary market overcompletely to private investors because they may demand tighter underwriting standards to offset risk.

“It is simply naïve to expect private investors to adjust theirexpectations of an acceptable return in order to make homeownershipmore accessible and affordable or to put capital at risk duringmarket downturns,” Willis wrote in his prepared remarks. With a nodto credit union industry concerns, he added, “Their presence mayalso make it harder for smaller originators to have access to thegovernment wrap.”

In a May 13 letter to subcommittee leaders, NAFCU Executive VicePresident of Government Affairs Dan Berger stressed how importantunrestricted access to the secondary mortgage market is to creditunions.

“This source of liquidity is critical to enabling credit unionsto serve the mortgage needs of their 95 million member-ownersacross the country,” he wrote to chairman Sen. Jon Tester(D-Mont.), who received significant credit union support in his2012 re-election.

Berger also stressed that second mortgage market reform mustinclude safeguards that would prevent discrimination againstinstitutions on the basis of asset size or any geopoliticalissues.

“There needs to be a heavy focus on fair pricing that reflectsloan quality as opposed to standards almost exclusively based onloan volume,” he said.

The soon-to-be NAFCU president also addressed a recent announcementfrom the Federal Housing Finance Agency that said Fannie Mae and FreddieMac will not purchase loans that don't meet the Consumer FinancialProtection Bureau's “qualified mortgage” standards.

The new policy could reduce mortgage credit in underserved andrural communities, Berger said.

The hearing is scheduled for 3:15 p.m.