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CUNA Outlines CU Principles For Housing Market Reforms
WASHINGTON (7/24/13)--Credit Union National Association Chief Economist Bill Hampel, testifying at the Senate's first hearing this year on housing finance reform, noted credit unions appreciate the need to reform the current housing finance system, but any reforms must not hinder the ability of credit unions to meet their members' housing finance needs in a member-friendly cooperative way.

Click to view larger image CUNA Chief Economist Bill Hampel testifies before a Tuesday Senate Banking subcommittee hearing on housing finance reforms. (CUNA Photo)
Hampel, the credit union witness for the Senate Banking subcommittee on securities, insurance and investment members hearing entitled "Creating a Housing Finance System Built to Last: Ensuring Access for Community Institutions," in part discussed S. 1217, a secondary mortgage market reform bill recently introduced by Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.). Other co-sponsors include Sens. Mike Johanns (R-Neb.), Jon Tester (D-Mont.), Dean Heller (R-Nev.), Heidi Heitkamp (D-N.D.), Jerry Moran (R-Kan.) and Kay Hagan (D-N.C.).

"CUNA believes that S. 1217 is a positive step towards creating a sustainable and affordable housing market," Hampel emphasized in his remarks.

Hampel told subcommittee chairman Sen. Jon Tester (D-Mont.) and committee member Heidi Heitkamp (D-N.D.) that the thirty year fixed rate mortgage as we know it would not exist without a government guarantee.

Without a government guarantee, credit unions would still be able to make some of these loans, but not nearly as many as their members would want, he said. Further, he added, credit unions would only be able to make as many thirty-year fixed rate loans as they could hold on their books. "Once we had a significant portion of those, we would have to sell them to someone else," he added. Thirty-year loans are likely to be held on an institution's books for a long time, and need some form of credit enhancement for an investor to buy them, he explained.

Thirty year mortgages, if taken on in a normal market, can be a very good thing for first-time homebuyers "because they are freezing in their housing costs for several years," he emphasized. 

Hampel also noted that credit unions need equal and fair access to a secondary market for lenders of all sizes that will ensure affordable mortgage products for their members. Outsourcing mortgage securitization to private entities could raise significant concerns regarding fair and equal access for credit unions, Hampel said in response to a question from Tester.
The CUNA economist also outlined a number of principles that CUNA hopes a new housing market finance system will accommodate. Those principles include:
  • Maintaining a strong regulator with rigorous market oversight to ensure safety and soundness, system standardization and equal access;
  • The ability to retain servicing rights when mortgages are sold on the secondary market;
  • Ensuring that even in troubled economic times, mortgage loans will continue to be made to qualified borrowers;
  • Emphasizing consumer education and counseling as a means to ensure that borrowers receive appropriate mortgage loans;
  • Maintaining consumer access to products that provide predictable, affordable mortgage payments to qualified borrowers, such as the 30-year fixed rate mortgage; and
  • Setting reasonable conforming loan size limits that adequately take into consideration variations in local real estate costs.
Overall, Hampel said, the transition from the current system to any new housing finance system must be reasonable and orderly, and the transition deadline needs to be flexible.

The hearing was held as the House Financial Services Committee marked up its own housing finance reform bill, the Protecting American Taxpayers and Homeowners (PATH) Act (H.R. 2767).
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