Hampel: Corker-Warner Bill Addresses Most CU Housing Finance Reform Concerns
CUNA Chief Economist Bill Hampel said upon the first few reads, a housing finance reform bill introduced Tuesday by Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.) appears to address most credit union issues, and overall, CUNA has “very positive inclinations” toward it.
Hampel was speaking Friday morning as part of a panel of industry experts selected by Rep. Maxine Waters (D-Calif.) to discuss housing finance reform.
The Corker-Warner bill makes several references to providing inclusivity to small lenders, Hampel said, addressing a major concern small lenders have with a potentially privatized secondary mortgage market.
However, Hampel said, he is concerned about enforcing those small-lender provisions, and said he hopes the final legislation could provide remedies in the event small lenders are not included.
Panelist Mike Fratantoni, vice president of single-family research and policy development for the Mortgage Bankers Association, said his organization feels the bill’s proposed secondary market structure is a move in the right direction, but said the MBA is concerned about the overall cost to build the proposed system.
Credit union access to the secondary mortgage market is important, Hampel said during his opening remarks, because credit unions are increasingly selling mortgages to mitigate interest rate risk.
Credit unions originated $120 billion in mortgage loans last year, he said, but since the financial crisis, they’ve been selling about half of those mortgages. During the first quarter of 2013, he added, credit unions sold 60% of all mortgages to the secondary market.
Before the crisis, when rates were higher, credit unions only sold one-third of their mortgages, he said.
“That practice of selling loans means a robust secondary market is important to credit unions,” he said.
Hampel continued that CUNA recognizes that as the secondary market is reformed, costs to access it will rise, but the price shouldn’t be based upon volume.
Ann Grochala, vice president of lending and housing policy for the Independent Community Bankers of America, said community banks also have concerns about pricing based upon volume.
In particular, she said, banks located in rural areas or small communities would suffer under any proposal for a new secondary market structure that includes pricing based upon volume.
If community banks were prevented from selling individual loans to the secondary market, they would be forced to pay additional fees to third parties who pool loans, Grochala added.
Hampel added that in a fully or mostly privatized system, companies involved in mortgage loan securitization would also be involved in loan originations. Those securitizers would give better deals to originators that are part of their own corporate structures, and make it tough for non-affiliated originators to compete.
Grochala added firms that both securitize loans and originate them would have access to small lender customer information. Community banks have had problems in the past with such firms using that information to steal customers, she said.
Other panelists included Anthony Hutchinson, senior policy representative for the National Association of Realtors; Cindy Chetti, senior vice president of government affairs for the National Multi Housing Council; and Tom Deutsch, executive director of the American Securitization Forum.