Guaranteed secondary market access supported
Nov. 1, 2013 – Witnesses at a Senate Banking Committee hearing on Thursday supported the preservation of government-guaranteed access to the secondary mortgage market, as strongly urged by NAFCU, in efforts at housing finance reform.
The hearing, “Housing Finance Reform: Essential Elements of a Government Guarantee for Mortgage-Backed Securities,” included testimony from the executive vice president of the Federal Reserve Bank of New York, the president and CEO of the Mortgage Bankers Association, the director of securitized assets at AllianceBernstein, and an economics professor from the University of Maryland School of Public Policy.
In his opening statement, Chairman Tim Johnson, D-S.D., said, “During the recent crisis, private capital pulled back and was unwilling to take credit risk except at an extremely high cost to borrowers. If a new system allows a variety of private capital participants, we must make certain that the new system is safeguarded against future boom and bust cycles, like that which recently occurred in the [private label securities] market. It will be essential to create a system that protects taxpayers, but also does not create so many inefficient layers that the mortgage market becomes too expensive for qualified borrowers.”
Committee members and witnesses focused the discussion on how to best protect taxpayers while still attracting investors to mortgage-backed securities. All witnesses agreed that a government guarantee is necessary and must be explicit.
Thursday’s hearing follows several others held earlier this week in the Senate and House on housing finance reform issues. In a Senate Banking Committee hearing Tuesday, witnesses aired support for housing finance reform that maintains government-guaranteed access to the secondary mortgage market for all – including credit unions.
NAFCU continues to push for housing finance reform with an explicit government guarantee to the secondary mortgage market for credit unions, and fair pricing based on loan quality and not loan volume.