The National Home Equity Mortgage Association this week formally joined the parade of groups calling on the government to rein in secondary mortgage market giants Fannie Mae and Freddie Mac.
In a policy statement issued Tuesday, the group asked Congress to review the charters of both government-sponsored enterprises and asked the Department of Housing and Urban Development to take regulatory action to confine the GSEs to "the limited secondary market/affordable housing mission originally intended."
The home equity lenders' group, whose members operate in a sector of the mortgage business that Fannie and Freddie are starting to tap, called for modification of the GSEs' "special charters and subsidies" to prevent unfair competition with private-sector companies.
"There is no marketplace need for Fannie Mae and Freddie Mac to expand into subprime and home equity lending or other areas currently served adequately by private firms," the group said.
Industry groups, concerned that Fannie and Freddie have a competitive advantage because of the implied government guarantee of their debt, have flooded Washington with similar policy statements throughout the year.
In June mortgage insurers and other financial institutions formed a lobbying group, FM Watch, to battle what it described as intrusions on private-sector turf by Fannie and Freddie. In July and August America's Community Bankers and the Mortgage Bankers Association weighed in with statements arguing for a narrow secondary market role for Fannie and Freddie.
The home equity association, reacting to recent initiatives by the GSEs to buy subprime and other nontraditional loans, "wanted to point out the specific grievances that we have with the way that the GSEs are abusing their charters," said Charles E. Coudriet, vice chairman of Saxon Mortgage Inc. of Richmond, Va., who is head of the group's GSE task force.
Home equity loans and mortgage refinancings are "not really homeownership issues" but "more like consumer credit issues," said Jeffery Zeltzer, the group's executive director. "When the competition is driven away, how are prices to consumers going to be controlled?" he asked.
Spokesmen for both Fannie Mae and Freddie Mac framed their efforts to bring more subprime borrowers into the prime market as a cost-saving measure for consumers.
The Fannie Mae spokesman called the home equity group's statement "pretty tired stuff," adding that "it's what you would expect from a group whose job it is to protect high-cost mortgages."
A Freddie Mac spokesman said Freddie's role is to "do business in the single-family mortgage market as broadly as we can."
Paul Reid, executive vice president of the Mortgage Bankers Association, said Fannie's and Freddie's purchases are confined to the "fringes" of the subprime market and probably would not make subprime specialists obsolete. "I think they're smart enough not to rush into the full array of subprime because of credit concerns and this being a unique market," he said. But he added, "From the ideological standpoint, there are some differences of opinion (over) where the GSEs should be permitted to go."
