WASHINGTON (2/14/12)--Credit unions already are planning for what could happen when the government winds down Fannie Mae and Freddie Mac, the most active buyers of residential mortgages on the secondary market. Losing the mortgage giants would impact smaller financial institutions, the Credit Union National Association (CUNA) told the Washington Post Sunday.
"Credit unions individually are fairly small in this business," said Bill Hampel, CUNA chief economist in the article. "But if there's no publicly supported vehicle to secondary markets, each credit union would be so small that they would not get good pricing or access. And that would cost credit union members."
CUNA is talking with the Treasury Department about the future of the two government-sponsored enterprises, but credit unions also are working on contingency plans, Hampel told the newspaper.
One solution could be greater reliance on credit union service organizations (CUSOs), he said. CUSOs enable institutions of all asset sizes to make loans by collectively managing the risks.
Traditionally, credit unions keep most of their mortgage loans on their books. CUNA estimated that credit unions sold between 25% and 40% of their mortgage loans before the financial crisis, and those percentages increased when interest rates dropped and spurred demand for mortgages.
Since private investors are inactive in acquiring mortgages, credit unions and other originators are questioning how the industry will function without Fannie and Freddie or without government support.
Juli Anne Callis, CEO of National Institutes of Health (NIH) FCU, Rockville, Md., also was interviewed for the story. She noted that private investors haven't stepped up yet although there are discussions.
For the full article, click the resource link.