Housing Finance Reform and Regulation of Government Sponsored Enterprises (GSE)
Housing Finance Reform and Regulation of GSEs
Position
ICBA supports both administrative and legislative housing finance reform to preserve market liquidity, protect taxpayers, encourage the return of private capital to housing finance, and ensure a stable national mortgage market for all stakeholders.
--- ICBA supports FHFA and Treasury efforts to develop a robust GSE capital framework, strong oversight, and supervision from FHFA.
--- ICBA urges FHFA and Treasury to resolve Treasury’s ownership based on the Preferred Stock Purchase Agreements (PSPAs) with a goal of allowing the GSEs to access the capital markets to raise outside equity which will help them to fully recapitalize.
--- ICBA does not support perpetual conservatorship or complete government ownership and control of the GSEs.
--- Housing finance reform efforts must provide robust and equitable secondary market access for lenders of all sizes, ensure no competition from the GSEs at the retail level, and permit retention of mortgage servicing rights on transferred loans.
--- ICBA does not support reform proposals that would liquidate and distribute the GSEs’ assets, intellectual property, or infrastructure to the largest national lenders and Wall Street institutions.
--- Community banks must be able to sell loans on a single loan basis for cash.
--- The GSEs must maintain their specific duty to serve all markets, including small towns and rural areas. Appraisal and underwriting guidelines must be flexible enough to accommodate the unique characteristics of these markets.
--- The FHFA Director serves at the pleasure of the President, resulting in significant shifts in policy and supervision as Administrations change. Single-director governance of the FHFA should be replaced with a five-member commission to bring a diversity of views and create a system of checks and balances that would strengthen rulemaking and regulatory consistency.
Background
Community banks represent approximately 20 percent of the mortgage market, and secondary market sales are a significant line of business for many community banks. While many community banks choose to hold most of their mortgage loans in portfolio, robust secondary market access remains critical for them to support mortgage lending demand
The current GSE secondary mortgage market structure has worked well for community banks by providing equitable access, not competing at the retail level, and permitting community banks to retain mortgage servicing rights on the loans they sell.
Housing finance reform must continue to address issues that undermine a level playing field by preventing smaller lenders from participating in the GSE secondary market due to unnecessary requirements that complicate and limit access while driving up costs.
Staff Contact
ICBA Statement on Fannie Mae and Freddie Mac 2022 Earnings Release
March 02, 2023 - ICBA Press Release Banner 2020
Washington, D.C. (March 2, 2023) — Independent Community Bankers of America (ICBA) President and CEO Rebeca Romero Rainey issued the following statement on the 2022 earnings releases from Fannie Mae and Freddie Mac.
“ICBA and the nation's community banks strongly urge the Federal Housing Finance Agency and the U.S. Treasury to expand efforts to resolve the government’s ownership of Fannie Mae and Freddie Mac and set them on a path to raise capital and eventually exit conservatorship.
"After nearly 15 years of conservatorship, Fannie Mae and Freddie Mac remain undercapitalized. The 2022 earnings reports from both government-sponsored enterprises reflect substantially decreased levels of annual net income following a turbulent year in the housing market. Without taking steps to allow Fannie and Freddie to escape government control and raise private capital, these companies will be trapped in conservatorship for the foreseeable future and will be unable to meet their regulatory capital requirements for at least another decade. This is an outcome that will ultimately prove harmful for the mortgage industry, for community banks, and for taxpayers.
"We therefore urge FHFA Director Sandra Thompson and Treasury Secretary Janet Yellen to take immediate action to resolve Treasury’s ownership based on the Preferred Stock Purchase Agreements with the goal of allowing the GSEs to access the capital markets and to eventually exit conservatorship.
"The long-term viability and liquidity of the housing market — which benefits Americans by enabling access to affordable credit for home financing — depends on the GSEs operating in a safe and sound condition. Raising adequate levels of capital and acting to end the perpetual conservatorship are critical steps toward protecting the taxpayer and strengthening the stability of the U.S. housing finance system.
"ICBA and community bankers nationwide look forward to continuing to work with policymakers as the debate over housing finance reform continues."
About ICBA
The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. ICBA is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education, and high-quality products and services.
With nearly 50,000 locations nationwide, community banks constitute roughly 99 percent of all banks, employ nearly 700,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding more than $5.8 trillion in assets, over $4.8 trillion in deposits, and more than $3.5 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at www.icba.org.
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