Newsroom

January 21, 2020

NAFCU's Kossachev shares multi-lender pools concerns, importance of GSEs to CUs

housing

In response to the Federal Housing Finance Agency's (FHFA) Request for Input (RFI) on the pooling practices for the agency's To-Be-Announced (TBA)-eligible Uniform Mortgage-Backed Securities (UMBS), NAFCU Director of Regulatory Affairs Ann Kossachev shared the association's concerns that excluding certain loans from multi-lender pools could harm credit unions and other responsible lenders.

"…[c]redit unions aim to provide access to credit and liquidity for all of their members," wrote Kossachev. "Credit unions do so while ensuring that members are fully informed of the process and potential risks associated with a certain product."

" Overcorrections in policies to address prepayment behaviors that hurt consumers and investors could lead to unintended consequences in the form of steering credit unions and other small lenders away from offering certain refinance options," she added.

The GSEs started issuing the UMBS in June 2019, after the rule was finalized by the agency. Under the rule, the GSEs are required to issue the UMBS – adopted in place of the GSEs' former to-be-announced-eligible mortgage-backed securities – as the single security.

In the letter, Kossachev also details the importance of the GSEs to the credit union industry, sharing that "based on recent Home Mortgage Disclosure Act (HMDA) data, of the mortgage loans that credit unions chose not to hold in portfolio, 47 percent were sold to Fannie Mae and Freddie Mac."

"Credit unions are responsible lenders and follow strong underwriting practices that ensure their loans will perform well; the credit union industry, on average, has lower delinquency and default rates on loans than banks," she added.

Additionally, Kossachev shared NAFCU's support for the inclusion of certain loans with faster prepayment speeds in multi-lender pools and need for data analysis of the effects proposed changes could have on lenders and consumers.

"It is important that the FHFA comprehensively evaluate ways to align the pooling practices of the GSEs to enhance the performance of the UMBS, improve liquidity in the TBA market, and pave the way for potential new entrants into the housing finance system to also utilize the UMBS," wrote Kossachev.

NAFCU has had multiple meetings with FHFA Director Dr. Mark Calabria, most recently attending a joint trades meeting with Calabria in October to further discuss housing finance reform efforts and ways to ensure fair pricing and access.

In addition to maintaining a sustainable secondary mortgage market for credit unions and fair pricing based on loan quality rather than volume, NAFCU's core principles for housing finance reform include the continued implementation of the common securitization platform and single security.