Removing Barriers Blog

Housing Finance Reform Hearing Held in the Senate
Posted May 12,2017 by CUNA Advocacy

Yesterday, the Senate Banking, Housing, and Urban Affairs held a hearing to discuss the status of the housing finance system.  The lone witness was Mel Watt, Director of the Federal Housing Finance Agency (FHFA), which oversees Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac. Prior to the hearing, CUNA sent a letter highlighting credit unions’ interest in the current and future structure of the housing finance system. 

Much of the hearing was spent discussing the current financial position of the GSEs, and the potential disruption that could occur to the housing market if either Fannie or Freddie were to experience a loss and require an infusion of capital from Treasury. Other members focused on the need for a government guarantee to ensure continued availability of affordable home loan products like the 30-year fixed rate mortgage. 

During the hearing, two members of the Committee raised questions about the effects specific aspects of the housing finance system have on small financial institutions, like credit unions and community banks: 

  • Senator Cortez-Masto (D-NV) asked about the negative impact of so-called front-end credit risk transfer transactions on small, community based lenders.  These arrangements, which have been piloted by FHFA on a small scale, would require lenders to retain some of the risk of the loans they originate, which could cause smaller lenders to leave the market. Similar concerns were expressed at the panel discussion CUNA participated in at the end of March for staff of the Senate Banking Committee. 

  • Senator Cotton (R-AR) raised concerns, captured in a YouTube clip, about Property Assessed Clean Energy (PACE) loan programs.  In particular, Senator Cotton focused on the potential risk to consumers from these loans, while Director Watt argued PACE loans create risk for the GSEs by encumbering their collateral. Senator Cotton has introduced CUNA-supported legislation S. 838 – the Protecting Americans from Credit Entanglements Act which would require important consumer disclosures for PACE loans. 

Hearing from Committee members on these important issues demonstrates bipartisan interest in meaningful housing finance reform that works for all market participants.  CUNA will continue to push strongly in both the House and Senate to protect the interests of credit unions large and small during this important debate.