The American Bankers Association, along with the ICBA, testified Tuesday on the need to ensure small banks have access to the secondary mortgage market, calling for workable and clear underwriting standards for all mortgage loans and a reduced government role in housing finance.
Christopher Dunn testified on behalf of ABA before the Senate Committee on Banking, Housing and Urban Affairs. “The overarching principle is to ensure that banks of all sizes have access to secondary market financing,” Dunn said. “Multiple sources for private market lenders, including portfolio lenders, will lead to a more diverse and ultimately safer housing financing system.”
Dunn also testified on the need to significantly revise proposals that define a “qualified residential mortgage.”
“We must get the underwriting standards correct today if we have any hope of transitioning to a stable system for secondary mortgage instruments,” he said. “The current proposals defining a narrow Qualified Residential Mortgage exemption from risk retention requirements fly in the face of workable and clear standards. Should this proposal be adopted as proposed, it will surely drive many banks from mortgage lending and shut many qualified borrowers out of the credit market entirely.”
Dunn’s testimony also called for a move toward a reduced government role in housing finance, noting that the transition would need to be done in a cautious and well-considered fashion taking a number of years.
“ABA believes that the role of Fannie Mae and Freddie Mac should be reduced and transformed, enabling the private sector to shoulder more of the responsibility to assure an effective and efficient secondary mortgage market,” he said. “The government’s role in housing finance should be focused primarily on ensuring stability and accessibility of the capital markets in the event of market failure.”
