On February 13, 2018, the Mortgage Bankers Association, along with over 130 mortgage bankers from 40 states, sent an open letter to Congress highlighting what they view as the need for comprehensive secondary mortgage market reform. According to the letter, it “has been almost ten years since Fannie Mae and Freddie Mac were placed into conservatorship. The undersigned lending institutions active in the mortgage markets are encouraged by the recent progress in Congress on comprehensive finance reform.”
As further outlined in the letter, these lending institutions believe that a “guarantor-based system” is the best way to meet the housing needs – because it protects both taxpayers and consumers. The reasons set forth in the letter are reprinted below:
Simplicity: A guarantor-based system preserves the existing technology and infrastructure, while addressing issues with Fannie Mae and Freddie Mac.
Competition: A guarantor-based system will promote competition between multiple guarantors seeking business from thousands of lenders.
Small Lender Access: By requiring the preservation of both a cash window and securities execution options, the guarantor model supports a level playing field and equal access for all lenders, and does not discriminate based on size or business model.
Bright Line: By limiting the ability of guarantors to be owned by a lender or engage in loan origination, the multiple guarantor approach ensures a clear separation between the primary and secondary mortgage markets.
Transition Risk: A multiple guarantor approach minimizes transition risks by using the new Common Securitization Platform (“CSP”), built in the past several years, which provides a scalable mechanism that can accommodate additional guarantors.