WASHINGTON Credit unions are selling increasing amounts of their record mortgage loans on the secondary market, almost all of them to Fannie Mae and Freddie Mac.
A record 59% of mortgages originated in the first quarter were sold to on the secondary market, according to Bill Hampel, chief economist for CUNA, who added virtually of it was sold to Fannie or Freddie, as few other secondary market players are buying mortgages. “The last few years it’s been around 55%,” Hampel told the Credit Union Journal this morning.
The increased dependence on the two government-backed enterprises comes as Congress has introduced legislation to wind down Fannie and Freddie and transfer their secondary market functions, like guaranteeing mortgages and packaging them for sale as mortgage-backed securities, to private companies.
The credit union lobby has been working with Congress to ensure that any Fannie and Freddie reform proposal includes a continued roll for a government backstop for smaller lenders, so that credit unions and community banks don’t get dominated in secondary market pricing by the big banks.
CUNA’s Hampel attributed credit unions’ increasing reliance on the secondary market to the record low interest rates, which have prompted credit unions to shed interest rate risk. Historically, said Hampel, credit unions have sold around 25% to 40% of their mortgages on the secondary market but have increased that amount steadily the past few years as mortgage rates have plummeted.
