Turf Battles Emerge in Bid to Reform Secondary Mortgage Market

WASHINGTON – Major sectors of the mortgage market began to stake out turf yesterday during the onset of congressional debate on a new regulatory scheme for the secondary market. Both the thrift lobby’s America’s Community Bankers and the National Alliance of Independent Mortgage Brokers urged lawmakers during the first hearing on the bill to regulate housing’s government sponsored enterprises to ensure that neither Fannie Mae or Freddie Mac will encroach on mortgage originations, the so-called primary market. But the community bankers lobby, the Independent Community Bankers of America, and NAFCU insisted there should be no ‘bright line’ barring the two secondary market giants from developing or creating new products and services to help smaller mortgage lenders. The president of the Federal Home Loan Bank of Pittsburgh urged Congress to allow the 12 FHLBs to securitize more than $1 billion in mortgages to help them expand their fledgling secondary market alternative to Fannie and Freddie, known as Mortgage Partnership Finance. Several bankers also expressed concern that Congress might expand the powers of the Farm Credit System, another GSE, and insisted the possibility of adding another federally-backed competitor should not be part of the current GSE bill. A bill introduced Friday in the House Financial Services Committee is similar to one that passed the full House in the last Congress and would create a new regulator for Fannie, Freddie and the FHLBs; set new capital standards for the housing GSEs; and allow the regulator to limit the portfolio size of Fannie and Freddie. Members of the committee hope to vote a bill as early as next week.