Industry trade groups have expressed their apprehension over proposals raised in a recent Federal Housing Finance Agency (FHFA) white paper titled ‘Building a New Infrastructure for the Secondary Mortgage Market.’
The white paper offers a potential framework for a new securitization platform, as well as another proposal that could employ a standard pooling and servicing agreement (PSA) that would be developed to incorporate by reference standardized documents created jointly by the government-sponsored enterprises (GSEs). The paper also outlines a plan to develop a model PSA that could be used by the private label mortgage-backed securities market as part of the new securitization platform.Â
A quartet of trade groups – the American Bankers Association, the Consumer Mortgage Coalition, the Independent Community Bankers of America and the Mortgage Bankers Association (MBA) – sent a joint letter to FHFA Acting Director Edward DeMarco that warns the proposal could have an impact ‘far beyond the immediate and near-term needs of the GSEs and the mortgage markets.’
‘FHFA should also consider the implications on the market given the current volume sold to the GSEs, particularly in light of recent volume limitations and net-worth requirements imposed on smaller lenders,’ the joint letter said. ‘The platform should not have the effect of spurring increased consolidation, and the GSEs and FHFA should make ensuring liquidity to smaller lenders a top priority.’Â
The MBA also sent a separate letter to the FHFA that stated the organization's apprehension over the recent changes to the GSEs' seller/servicer guides.
‘Such changes include the imposition compensatory fees and increases in g-fees, as well as unilaterally allowing Fannie Mae and Freddie Mac the increased ability to move servicing with or without cause and [to] provide for additional servicing requirements without additional compensation, among others," the MBA said. ‘Servicers do not want the private label market to be reborn in an environment that one party, like the government, has all the power.’Â
The MBA further requested that the FHFA and the GSEs enter into a ‘meaningful dialogue’ with the financial services industry and Congress to discuss this issue at greater length.
Separately, the National Association of Federal Credit Unions (NAFCU) voiced its concerns on the white paper.
‘As NAFCU has stated many times, in order to ensure equitable and fair access to the secondary housing market for credit unions, it is critical that any reform does not discount the importance of maintaining at least two entities in which mortgage-backed securities have a government guarantee,’ said Carrie Hunt, NAFCU's general counsel and vice president of regulatory affairs, in a letter to DeMarco. ‘In fact, we strongly believe that government guarantee of the principal and interest, which carries the full faith and credit of the U.S. government of the securities, should be a central component of the future market.Â The guarantee should support single- and multi-family mortgages that the GSEs have historically supported.Â
‘Also, and importantly, it is critical that the GSEs' successors place significant value and focus on the quality of mortgages rather than merely engaging lenders with greater quantity of mortgages in their portfolios,’ Hunt added. ‘NAFCU believes a greater focus on quality will help ensure that credit unions have more equitable access to the secondary market. Simply stated, credit union mortgages are of very high quality, and a greater emphasis on quality would offset disincentives to purchases mortgages from lenders with relatively lower volume.’