As the Trump administration looks to reform housing finance, US credit unions are calling for new measures to ensure member-owners are not at a disadvantage.
On 27 March, president Trump signed a memorandum instructing federal agencies to develop a plan to overhaul the US housing finance system. This sets out a reform plan for the Federal National Mortgage Association – Fannie Mae – and the Federal Home Loan Mortgage Corporation –Freddie Mac. The government-sponsored enterprises (GSA) have been in conservatorship since their federal bailout in September 2008.
Mr Trump has pledged to end this conservatorship, improve their regulatory oversight, and promote competition in the housing finance market. The Department of Housing and Urban Development (HUD), which oversees the agencies, has been tasked to prepare a reform plan.
The Senate Banking Committee also held a two-day hearing in which it heard from Carrie Hunt, executive vice president of government affairs and general counsel of the National Association of Federally-Insured Credit Unions (Nafcu). She said Nafcu members used both Fannie Mae and Freddie Mac to sell and securitise their loans and used the Federal Home Loan Bank system for liquidity.
She added that credit unions must have guaranteed access to the secondary mortgage market and that access must be fair. Credit unions must be able to participate on a level playing field and have access to pricing that is focused on quality not quantity, she said.
“We do not support a pricing structure based on loan volume, institution asset size, or any other issue that will put our member-owners at a disadvantage,” she told the committee, adding that an explicit government guarantee should be part of any reform effort.
Nafcu also believes Congress should not be mandating requirements, such as a minimum down payment percentage. “This is a requirement that may be put in place by the regulator and should be flexible to account for economic fluctuations in the housing market,” said Ms Hunt.
And she stressed the need for a single independent regulator to provide stability and confidence in the market and said credit unions had general concerns about overall costs and workability, including the transition, to any new housing finance system.
In a statement, Nafcu president and CEO Dan Berger said: “A healthy secondary mortgage market is of the utmost importance to Americans, and we support efforts by the Trump administration to reform our housing finance system in a way that promotes competition and puts an end to taxpayer bailouts.
“To this end, Nafcu will continue to push for legislative measures to guarantee access to the secondary mortgage market for lenders of all sizes, loan pricing at the GSEs that is based on quality not quantity, and the establishment of an explicit government guarantee at the GSEs to provide certainty in the marketplace. To protect taxpayers and the safety and soundness of the housing finance system, the GSEs also should be permitted to rebuild capital.”
The Credit Union National Association (Cuna), which represents both federal and state-level credit unions, also wrote to the committee chair Mike Crapo to express its concerns.
“As important as it is to act to reform the secondary mortgage market, it is even more important to get it right,” read the letter. “Cuna and our members continue to believe that for credit unions and our members, getting it right should mean one thing: Community lenders must be at the core of the future secondary mortgage market.”
Cuna has identified several principles crucial for credit unions and other small lenders to continue to provide affordable mortgage credit. These are equal access to lenders of all sizes; affordable mortgage payments; a reasonable and orderly transition to a new system, strong oversight for market entities; a federally insured system for durability; and preservation of things that work in the current system.
Credit union first mortgage originations accounted for nearly 9% of total US first mortgage originations in 2018, while the average first mortgage loan size at credit unions is approximately US $200,000 (£152,100), 28% lower than the average loan size at banks.