Rep. Scott Garrett’s (R-N.J.) Private Mortgage Market Investment Act, which was the subject of a Thursday hearing, could create a secondary mortgage market made up exclusively of the largest banks in the country, and could result in credit unions being excluded from that market, the Credit Union National Association (CUNA) has warned.
Thursday’s hearing took place before the House Financial Services subcommittee on capital markets and government sponsored enterprises. Garrett’s bill would require the Federal Housing Finance Agency (FHFA) to develop underwriting standards and securitization agreements and abolish the risk retention standards set forth by the Dodd-Frank Act. The legislation would also provide new disclosures for mortgage investors and securities purchasers.
FHFA Acting Director Edward DeMarco testified during the hearing, saying that “private capital markets can and should reclaim a prominent portion in providing housing finance.” Garrett’s proposal “broadens the discussion of how we might do that,” he said.
DeMarco said “there seems to be relatively broad agreement that the government sponsored enterprise model of the past, where private sector companies were provided certain benefits and charged with achieving certain public policy goals, did not work.” However, he added, there will likely “always be some portion of the housing or mortgage market that will be assisted by government programs, either through direct funding or through guarantees.”