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The Federal Housing Finance Agency's proposals to adopt additional front-end credit risk transfer structures could force credit unions out of the mortgage market, NAFCU Regulatory Affairs Counsel Ann Kossachev told the FHFA in a comment letter Thursday.

Kossachev wrote that NAFCU supports the efforts of the FHFA to reduce overall risk at Fannie Mae and Freddie Mac. She asked the agency for an in-person meeting to discuss "the FHFA's proposals and further elaborate on the credit union perspective."

She highlighted the following three main concerns with the FHFA's proposals:

1. Limiting front-end credit risk transactions to only those that are "economically sensible" has the potential to force credit unions out of the mortgage market.
2. Requiring public disclosure of the details of transactions for loans sold to the government-sponsored enterprises will likely impose burdensome expenses on credit unions.
3. Establishing a level playing field for all lenders must include consideration of the unique structure and constraints of credit unions so they are not disadvantaged against larger lenders.

Kossachev asked that the FHFA consider expanding its definition of "economically sensible" transactions so that credit unions would not be excluded from participating in front-end credit risk transactions.

Regarding the second point, she also noted the potential of reputational and privacy risks for both the credit union and its members if the FHFA were to require public disclosure. She asked what safeguards the FHFA intends to use to ensure that credit unions and their members will not be exposed to these kinds of risks.

To the third point, Kossachev noted alternatives the FHFA could pursue that would put credit unions on a more even playing field with larger lenders. She suggested the FHFA reconsider the option of giving the Federal Home Loan Banks the authority to experiment with securitizing and selling existing mortgages held in their Acquired Member Assets program.

"NAFCU realizes that this may require legislative action, but financial market conditions have improved and the time has come to reevaluate the role of the FHLBs," she wrote.