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The Federal Housing Finance Agency's most recent strategic plan addressing the conserved Fannie Mae and Freddie Mac raises more questions than it answers, especially in regard to guarantees for residential mortgages and privatization, Brad Thaler, NAFCU's vice president of legislative affairs, told the Senate Banking Committee yesterday.

Thaler's letter to committee Chairman Tim Johnson, D-S.D., and Ranking Member Richard Shelby, R-Ala., was sent ahead of today's hearing on the state of the housing market and removing barriers to the economic recovery. This is the second part of this hearing in what has been a long series the committee has held on various issues related to the housing market.

While noting NAFCU's appreciation of the FHFA's commitment to understanding credit unions' unique nature and need for access to the secondary mortgage market, Thaler told the lawmakers that the strategic plan the FHFA released Feb. 21 fails to address some important concerns.

A key issue for NAFCU members that was not discussed in the proposal was whether a government guarantee will be a part of any reform plan, Thaler said. In addition, the FHFA's plan does not include details regarding the potential impact of a single securitization platform or the role of pricing. The degree to which the secondary housing market will be under the control of for-profit private entities also remains unclear in FHFA's vision, he said.

"Privatization could freeze out community-based lenders by leaving the secondary market dominated and controlled by a handful of large banks," Thaler explained. "Undoubtedly, this is the worst-case scenario for credit unions and their members."

With HUD Secretary Shaun Donovan scheduled to testify during today's hearing, Thaler also reiterated NAFCU's position on strategic defaults. He said the Federal Housing Administration's three-year lockout period for borrowers who strategically default on their mortgages is not adequate to stem the tide of the defaults. NAFCU and its members are hopeful that this issue will be further examined by the panel moving forward, he added.

Thaler also promoted NAFCU's concerns regarding strategic defaults in a letter yesterday to the House Financial Services Subcommittee on Insurance, Housing, and Community Opportunity.