Housing Finance Reform

It has been over eight years since the federal government took control of Fannie Mae and Freddie Mac from their stockholders in a process known as conservatorship. Since that time, the future of the Government-Sponsored Enterprises (GSEs) and the secondary mortgage market has become a topic of debate among lawmakers and the Administration.

NAFCU is committed to educating Congress and the Administration about the positive impact the secondary market has had on the credit union community and the role credit unions play in ensuring the safety and soundness of our nation's housing market. In any housing finance reform efforts, NAFCU will push for equal access to the market for credit unions and fair pricing based on loan quality as opposed to volume.

NAFCU has written a whitepaper on Housing Finance Reform Principles that highlights the credit union perspective. We encourage you to read and share this resource to ensure the safety and soundness of credit unions nationwide.

Download Whitepaper Now

Recent Activity on Capitol Hill

On October 25, 2017 Rick Stafford, Pesident/CEO of Tower FCU, testified on behalf of NAFCU before the House Financial Services Subcommittee on Housing and Insurance for a hearing entitled, "Sustainable Housing Finance: Private Sector Perspectives on Housing Finance Reform." Rick noted the longstanding and vital relationship between credit unions and the GSEs, as well as the importance of credit unions to continuing to have unfettered access to the secondary market.

On July 20, 2017, Chuck Pervis, President/CEO of Coastal FCU, testified on behalf of NAFCU for a hearing held by the Senate Banking Committee, entitled "Housing Finance Reform: Maintaining Access for Small Lenders." Chuck highlighted NAFCU's Housing Finance Reform Principles, particularly the importance of ensuring that credit unions are not priced out of the secondary mortgage market in any GSE reform proposal. 

The FHFA has come under political pressure to shift its policy on principal forgiveness for certain underwater borrowers whose loans are owned or guaranteed by Fannie Mae or Freddie Mac. On March 22, 2016, NAFCU expressed concerns about this policy to the extent that it could enable or precipitate strategic defaults in a comment letter to the FHFA.

Credit unions stand on the forefront of the battle to keep families in their homes, and NAFCU has deep concerns about any government program that would encourage some borrowers that have the ability to repay to instead walk away from their home and cause credit unions and their members losses that cannot be recouped.

Relative to Fannie Mae and Freddie Mac, both the House Financial Services and Senate Banking Committees took up and passed reform legislation during the 113th Congress. While the respective bills did not reach a conference committee or become law, both pieces of legislation were comprehensive and significant. The House bill seriously curtailed the government's role in the housing market, while the Senate bill maintained a larger government role and set up a special mechanism for small community lenders to access the secondary market. NAFCU has outstanding concerns with both proposals and will continue to advocate for a system rewarding loan quality over quantity that ensures direct credit union access to the market without having to go through larger lenders such as banks.

NAFCU's Position on Housing Finance Reform

Government-Sponsored Enterprises, specifically Fannie Mae and Freddie Mac, enable credit unions to obtain the necessary liquidity to create new mortgages for their member-owners by utilizing the secondary market.

The Federal Home Loan Banks (FHLBs) allow credit unions to meet their liquidity needs through timely loans. The availability of these stable and reliable sources of funding has facilitated credit unions' ability to offer new mortgage loans and related credit to their members, many of whom have been denied access to homeownership by other lenders.

Thus, both GSEs and FHLBs serve as valuable partners in credit unions' efforts to meet their members' needs, particularly with regard to mortgage loans. This continues to be true in the current economic environment.

Issue Background Information

The Housing Finance Reform and Taxpayer Protection Act (S. 1217) championed by Bob Corker (R-TN) and Mark Warner (D-VA) would have wound down Fannie Mae and Freddie Mac and replaced the GSEs with a privately capitalized system that aimed to preserve market liquidity and protect taxpayers from future economic downturns. Of note, the bill included a narrow government guarantee on MBS and would have created a small lender mutual to help ensure credit union access to the market.

Timeline of legislation and events:

  •  January 2017: Several lawmakers and agency heads, including House Financial Services Chairman Jeb Hensarling (R-TX), Senate Baking Committee Chairman Mike Crapo (R-ID) and Treasury Secretary Steve Mnuchin, stated that housing finance reform would be a major agenda item under their leadership.  
  • April 2014: Senate Banking Committee marked-up a bill authored by Senators Jonhson (D-SD) and Crapo (R-ID) that would have wound down the GSE's and preserved secondary market access for small financial institutions by creating a a separate mutual corporation to allow small lenders to continue to sell individual loans for cash.
  •  November 2013: John Harwell of Apple FCU testified before the committee on housing finance reform issues from a small lender perspective. He noted that the Corker-Warner legislation is a good first step in the debate. Mr. Harwell also reiterated how important credit union access and fair pricing for credit union loans are, should reforms be made to the secondary mortgage market.
  • August 2013: President Obama outlined core housing goals of the Administration and urged Congress to come together and deal with this issue in a bipartisan way. Of significance, he advocated to maintain consumer access to products such as the 30-year fixed rate mortgage and noted that credit unions and other small institutions "must be given the same opportunity to compete in any future system to ensure that consumers have the broadest number of options."
  • July 2013: Janice Sheppard of Southwest Airlines FCU testified before the House Financial Services committee on the Protecting American Taxpayers and Homeowners (PATH) Act. She reiterated to lawmakers how critical secondary mortgage market access is for our nation's credit unions. Ms. Sheppard also testified that any future system must ensure credit union loan quality is taken into account and larger lenders don't receive deep discounting based on mortgage volume as opposed to quality.
  • July 2013: House Financial Services Chairman Jeb Hensarling (R-TX) presented the committee with draft legislation called the PATH Act. While the legislation, subsequently introduced by Scott Garrett (H.R. 2767), would make significant positive reforms to mortgage rules being promulgated by the Consumer Financial Protection Bureau, it also would phase out Fannie Mae and Freddie Mac over a five-year period and seriously curtail the government's role in the housing finance system.

    While NAFCU has outstanding concerns about the PATH Act, which was passed out of the Financial Services Committee in July 2013, NAFCU will continue to work with Chairman Hensarling and other interested parties as the bill could be considered on the House floor in the 115th Congress.
  • June 2013: In the Senate Banking Committee, Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) focused on an FHA solvency measure earlier in the Congress and have now turned their attention to larger housing finance reform issues. A bipartisan group of Banking Committee members put together a housing finance reform bill introduced in June 2013.
  • September 2008: After turmoil in the housing, mortgage, and financial markets raised doubts about the future of Fannie and Freddie, both entities were placed under conservatorship. Lawmakers also created the Federal Housing Finance Agency to replace the Office of Federal Housing Enterprise Oversight as the safety and soundness regulator for the GSEs. The goal of conservatorship is to preserve GSE assets and return to sound financial condition, allowing the conservatorship to end.

Recent Media Outreach

NAFCU has stayed at the forefront of this issue and continued to champion credit unions in major media nationwide.

NAFCU: FHFA Principal Reduction Plan a ‘Dangerous Precedent’ (CUToday.info, April 17, 2016)

Is FHFA’s Principal Reduction Plan ‘Too Small and Too Late’? (Credit Union Journal, April 15, 2016)

FHFA principal reduction plan garners mixed reaction from housing industry (Housingwire, April 14, 2016)

Report: Fannie, Freddie Plan Would Reduce Mortgage Balances—NAFCU Shares Concerns (CUToday.info, March 23, 2016)

FHFA to Get Off the Fence on Principal Relief (DSNews, March 23, 2016)

 Agency sets new rules for federal home loans (The Hill, January 12, 2016)

FHFA releases final rule for FHLB membership (HousingWire, January 12, 2016)

FHFA Drops Proposal From Final FHLBank Rule (Credit Union Times, January 12, 2016)

FHFA Heeds NAFCU on 10 Percent Rule for FHLB Members (January 12, 2016)  

NAFCU Statement on Mark-Up of Housing Finance Reform Bill (May 15, 2014)

White House applauds housing reform bill, but no stand on vote (The Hill, May 15, 2014)

Johnson-Crapo reform bill voted to Senate floor (HousingWire, May 15, 2014)

Senate Banking Panel Approves Bipartisan GSE Bill (Credit Union Journal, May 15, 2014)

Housing Finance Reform Clears Committee (Credit Union Times, May 15, 2014)

Stakeholders position themselves ahead of Johnson-Crapo markup (The Hill, April 14, 2014)

Sens. Johnson, Crapo Unveil Senate GSE Agreement (Credit Union Journal, March 11, 2014)

Lenders fear squeeze from mortgage rules (The Hill, Jan. 14, 2014)

FHFA to Delay Increase in Mortgage Fees By Fannie, Freddie (Wall Street Journal, Dec. 20, 2013)

Recent Policy Letters

Read recent letters from NAFCU to members of Congress on key housing finance reform issues that affect credit unions and their members.

6-28-17 NAFCU Letter on Tomorrow's Hearing, "Principles of Housing Finance Reform"

5-10-17 NAFCU Letter on Credit Unions and the Federal Housing Finance Agency

12-9-16 NAFCU Letter on Principles for Housing Finance Reform

3-22-2016 NAFCU Letter on Principal Reduction

3-15-2016 NAFCU Letter on the Duty to Serve Proposal

1-11-2016 NAFCU Letter on Proposed National Survey of Existing Mortgage Borrowers

2-10-2015 NAFCU Letter to HFSC on FHA Oversight

1-26-2015 NAFCU Letter to the House Financial Services Committee

4-28-2014 NAFCU letter to Sens. Johnson, Crapo on Housing Reform Markup 

4-11-2014 NAFCU-ICBA-CUNA joint letter to Sens. Johnson, Crapo on GSE reform

View all NAFCU policy letters

Updated November 2017