WASHINGTON (1/11/11)--The challenge of reforming the government-sponsored housing enterprises is huge, but the costs to the economy and housing market of failing to make necessary changes is far greater, the Credit Union National Association (CUNA) told the U.S. Treasury Department in a letter urging a series of reforms. CUNA President/CEO Bill Cheney wrote in a Jan. 10 letter that CUNA and credit unions agree with a range of policy makers that “meaningful, comprehensive efforts” to address the numerous problems leading to the federal government’s conservatorships of Fannie Mae and Freddie Mac in September 2008 deserve to be addressed in the 112th Congress. In its letter, CUNA sent to Treasury Secretary Timothy Geithner specific recommendations the group has developed that reflect the needs and concerns of credit unions and their members regarding reform of the government-sponsored enterprises (GSEs). The recommendations include:
* Continuing the role of the GSEs to ensure that the housing finance system remains efficient, even if the current entities themselves must be replaced; * Equal access to the secondary market must be preserved going forward; it must be open to lenders of all sizes on an equitable basis; * A strong system of supervision must be developed and maintained, and entities providing secondary market services must be subject to appropriate regulatory and examination oversight to ensure safety and soundness, as well as strong capital requirements; * A reformed secondary mortgage market should distinguish between the goals of public policy, such as affordable housing, and a secondary market for mortgages; and * Legislation and regulations implementing the new housing finance system should emphasize consumer education and counseling as a means to ensure that borrowers receive appropriate mortgage loans.
Cheney told Geithner that mortgage lending is “a significant activity for many credit unions and is a vital financial service for their members.” He emphasized that throughout the housing crisis and recession, as other lenders pulled back credit, credit union first mortgage originations increased from $53 billion in 2006 to $59 billion in 2007, $70 billion in 2008 and a record $94 billion in 2009. Through September of 2010, credit unions originated first mortgages at an annual rate of $74 billion, with a delinquency rate in 2010 that has been about half that of commercial banks. Cheney further noted that from 2006 to 2008, credit unions sold about one-quarter of first mortgage originations. In 2009 and 2010, sales accounted for a little more than half of originations. “Obviously, a healthy, efficient and accessible secondary market is vital to credit unions and the millions of consumers they serve,” Cheney wrote. CUNA also circulated the letter to Senate Banking Committee Chairman-Designate Tim Johnson (R-S.D.), Senate Banking Committee ranking member Richard Shelby (R-Ala.), House Financial Services Chairman-Designate Spencer Bachus (R-Ala.), House Financial Services ranking member-designate Barney Frank (D-Mass.), and Special Advisor to the President Elizabeth Warren. To read CUNA’s extensive comments on GSE reform, use the resource link below.