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House Financial Services Committee Chairman Jeb Hensarling, R-Texas, at an event Wednesday described America's housing finance system as "broken" and called for a bipartisan, sustainable approach to reform it. NAFCU has long advocated for housing finance reform that maintains credit unions' unfettered access to the secondary mortgage market.

In his remarks, Hensarling said the current housing finance system is "rigid and risky, distortive and inefficient." Hensarling also referenced the PATH Act, which was passed by his committee in 2013 and would have begun to phase out government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.

In October, a NAFCU witness before the House Financial Services committee testified that "credit unions have confidence" in the current system because of the competitive pricing and easy flow of liquidity, among other things. Although NAFCU has argued that the GSEs should be allowed to recapitalize to ensure they are safe and sound, any privatization efforts should occur slowly over several years. The association has also expressed concerns about reform proposals that severely curtail the government's role in the housing finance system because credit unions rely on the GSEs as they currently exist for secondary mortgage market access.

The housing finance reform principles Hensarling noted Wednesday are:

• winding down Fannie Mae and Freddie Mac to eventually repeal their charters;
• providing securitizers with strong, bank-like capital and ensuring community financial institutions can compete on a level playing field;
• requiring any new government affordable housing program to stay on budget, be results-based, and target real homebuyers for the purpose of buying a home they can afford to keep;
• returning the Federal Housing Administration to its original role of serving first-time homebuyers and low- and moderate-income individuals.

NAFCU will continue to work with Hensarling and others to ensure that the costs of a reformed housing finance system do not become burdens on small lenders, such as credit unions. NAFCU also has outlined its core principles for housing finance reform, which the association believes are necessary to guarantee the continued safety and soundness of the credit union industry.