Got it. October 19, 2017 The Honorable Melvin L. Watt Director Federal Housing Finance Agency
400 7th St., SW
Washington, D.C. 20024
Dear Director Watt:
On behalf of the National Association of Federally-Insured Credit Unions (NAFCU), the only
national trade association focusing exclusively on federal issues affecting the nation’s federally-
insured credit unions, and the Independent Community Bankers of America®
(ICBA), the
nation’s voice for more than 5,700 community banks, we are writing to you regarding your
recent statement before the U.S. House of Representatives Committee on Financial Services. We
would like to thank you and your staff at the Federal Housing Finance Agency (FHFA) for your
commitment to ensuring the continued stability of the government-sponsored enterprises (GSEs),
Fannie Mae and Freddie Mac, and championing reform within the GSEs. NAFCU and ICBA
both agree, however, that internal reforms are not enough and that the time has come for
Congress to act on comprehensive housing finance reform to create a more healthy and
sustainable secondary market. We believe this process begins with allowing the GSEs to rebuild
their capital buffers.
NAFCU and ICBA are pleased that you support this position. The GSEs have been in
conservatorship for close to a decade now and have consistently been profitable since 2013, but
the quarterly sweep of all GSE profits to the Treasury Department, as required under the Senior
Preferred Stock Purchase Agreements (PSPA), puts taxpayers and the housing market at risk in
the event of another financial downturn. With January 1, 2018 fast approaching, NAFCU and
ICBA urge the FHFA to do everything within its authority to ensure the GSEs maintain a capital
buffer to weather any short-term losses that may occur during the ordinary course of business.
Allowing the GSEs to rebuild their capital buffers to avoid another draw of taxpayer support
would maintain investor confidence, which is essential to the safety and soundness of the
secondary market, and prevent any further market disruptions. This would ensure the GSEs can
continue to provide liquidity to credit unions, community banks and other lenders to support a
vibrant housing finance system. It is essential that the GSEs maintain a modest capital buffer–
perhaps only enough to cover losses in a single quarter–so that they are not forced to draw on the
PSPA commitments at the expense of taxpayers. Such an occurrence would not only erode
investor confidence but would also taint the public’s perception of the housing finance system
and the secondary market, putting the future of the housing finance system at risk. This self-
inflicted outcome must be avoided.
Federal Housing Finance Agency
October 19, 2017
Page 2 of 2
We are optimistic that under your leadership, the FHFA will do what is necessary to ensure the
GSEs continue to operate effectively and efficiently in a safe and sound manner. Thank you for
your attention to the critical issue of housing finance reform and the opportunity to provide you
with our perspective. If you have any questions or concerns, please do not hesitate to contact us
directly.
Sincerely,
B. Dan Berger
President and CEO
National Association of Federally-Insured Credit Unions
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