WASHINGTON – A top credit union executive urged Congress this morning to retain a government role in the secondary mortgage market, lest credit unions and other mortgage lenders be left at the mercy of a privatized secondary market dominated by a handful of bank giants.
“Quite frankly, many credit unions fear a world in which the secondary mortgage market is occupied by a handful of very large banks,” said Rod Staatz, president of $2 billion State Employees CU of Maryland, who was testifying before the Senate Banking Committee.
“Will the large banks want to deal with small financial institutions such as credit unions? If so, will the pricing be competitive with larger financial institutions? Will large banks favor their own mortgage originating divisions or subsidiaries?” said Staatz.
The credit union executive, appearing on behalf of CUNA, was testifying on proposals before Congress to wind down the government-backed Fannie Mae and Freddie Mac and replace their secondary market roles with the private sector. Pressure is mounting to resolve the two-year-old federal receiverships of Fannie and Freddie, which is projected to cost taxpayers as much as $250 billion.
Staatz, also a member of the CUNA Board, said CUNA believes a continued government role in the secondary market is critical to ensuring credit union access to mortgage financing. “Whether the functions of (Fannie and Freddie) are privatized or remain public to some degree, it is essential that the federal government’s regulation of the secondary market ensure lenders of all types and sizes, including credit unions, have access to a secondary market that is equitable,” said the CUNA director. “This means that terms, rates, and conditions for selling loans in the secondary market must be affordable and fair to all lenders, regardless of their size or charter type.”
The credit union executive was joined in his concerns by a representative of the Independent Community Bankers Association and American Bankers Association, who share CUNA’s concerns over the privatization of the secondary market. Their view was balanced by the testimony of the libertarian think tank American Enterprise Institute, which has long favored a privatization of the secondary mortgage market.
