Credit union mortgage lenders who sell their mortgages may face higher hurdles from the newly drafted Financial Stability Improvement Act.
The House Financial Services Committee released draft language of the legislation last week and a portion of it has drawn fire from small mortgage lenders. The Community Mortgage Banking Project and the Community Mortgage Lenders of America released a joint statement today seeking to alert the industry to the problems they argued small mortgage lenders like credit unions could face.
The bill would require any mortgage lender selling a mortgage loan on the secondary market to retain 10% of the credit risk of any loan it sold onto the secondary market. Further, any entities that acquired mortgages and repackaged them into mortgage backed securities would also have to retain 10% of the risk.
“The impact would be particularly severe for local lenders, including independent community mortgage bankers and local banks,” the organizations wrote. “Today, these lenders provide consumers with safe and affordable mortgage products, local market knowledge and top quality service. But these companies rely heavily on their ability to sell these loans into the secondary market. Today, these local lenders account for more than 40% of all home mortgage originations, and more than 50% of FHA loans. These companies are critical to our nation's mortgage supply chain, but simply are not structured to retain cumulative layers of credit risk over multiple origination cycles.”