The Independent Community Bankers of America (ICBA) has released a comprehensive white paper that provides the community banking industry’s priorities as Congress debates how to reform the housing finance system. Housing Finance Reform: A Community Banking Perspective outlines the community banking industry’s role in the housing finance system, principles for reforming the secondary mortgage market and perspectives on current reform proposals.
“Mortgage lending has always been an important service of community banks, which hold nearly 20 percent of the market and make a disproportionately large share of loans to low‐ and moderate‐income borrowers and a larger share of loans for home purchases than other lenders,” Senior Vice President of Mortgage Finance Policy Ron Haynie said. “ICBA and our nation’s community banks want to ensure these common-sense lenders can continue to serve the mortgage-finance needs of customers and communities nationwide for years to come.”
Housing Finance Reform: A Community Banking Perspective warns policymakers against creating a more complex secondary mortgage market, which would limit community bank access and give control of the mortgage market to the same Wall Street megabanks that precipitated the housing finance crisis from which the nation is still recovering.
“My community bank depends on easy access to the secondary market that doesn’t require me to sell loans to a competitor,” said Jack Hopkins, chairman of ICBA’s Housing Policy Task Force and president/CEO, CorTrust Bank, Sioux Falls, S.D. “Consumers are better served by a diverse, competitive market with thousands of active mortgage lenders, including community banks, which specialize in personalized and customized lending that megabanks are structurally incapable of providing.”
The white paper includes key features of a successful secondary mortgage market, which must:
►provide equal and direct access for community banks on a single‐loan basis that does not require community banks to securitize their own loans,
►preserve the relatively simple process of selling loans for community banks and other small lenders,
►be well capitalized, liquid and reliable enough to effectively serve the entire mortgage industry in all markets, at all times, even in challenging economic circumstances,
►ensure robust oversight by a strong and competent regulator,
►not appropriate customer data for cross-selling of financial products,
►provide originators the option to retain servicing and ensure servicing fees are reasonable,
►have a limited focus on supporting residential and multifamily housing, and
►maintain an explicit government guarantee against catastrophic loss.