The Mortgage Bankers Association (MBA) has released "A Secondary Market that Works for Smaller Lenders," a concept paper suggesting that any reform to the secondary market must provide smaller lenders with equal access and execution opportunities, while also containing an explicit federal guarantee for certain mortgage-backed securities (MBS). MBA’s concept paper is the third piece of a five-part plan which recommends immediate steps the Federal Housing Finance Agency (FHFA) can take to ease the transition as policymakers debate the future of the government role in housing finance.
“It is critical that as policymakers transition away from Freddie Mac and Fannie Mae, a competitive environment is created so that smaller lenders are able to be effective in the secondary market,” said Debra W. Still, CMB, MBA’s Chairman. “Community lenders are a crucial part of a diverse, efficient marketplace that provides Americans across the country with safe, sustainable and affordable mortgage credit.”
The paper outlines discrete needs that must be addressed for smaller lenders to be able to utilize the secondary market, including:
►Price certainty;
►Execution for both servicing-retained and servicing-released loans;
►Single loan and/or small pool executions with low minimum pool size;
►Ease of delivery; and
►Quick funding.
MBA’s concept paper suggests that as the GSE portfolios wind down, Fannie Mae and Freddie Mac should maintain sufficient balance sheet space to allow for the aggregation of loans from smaller lenders who are not yet ready to securitize. Additionally, the paper calls for the FHFA Common Securitization Platform initiative to include plans for the acceptance of small lot deliveries into multi-lender pools.
“MBA’s concept papers all contain core components of any future state including transparency, a steady flow of mortgage capital and an explicit federal guarantee,” said Bill Cosgrove, CMB, MBA’s vice chairman. “This paper clearly and concisely lays out the key issues that community banks and independent mortgage banks like mine need to see addressed as we move towards the secondary mortgage market of the future.”
