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GSEs – Federal Regulation

Parity – Equitable Treatment of Lenders by Size

In order to promote mortgage market competition, and to assure fair and equal treatment for the borrowers served by community-based lenders, CHLA believes that the GSEs should not discriminate against lenders based on their size or loan volume,. Therefore, CHLA believes that FHFA should:

  • Establish an explicit requirement for full parity with respect to G Fee pricing
  • Provide full public transparency for G Fee pricing
  • Prohibit the GSEs from discrimination based on size or loan volume with respect to other policies, including proxies, for pricing, LP/DU waivers, repurchase treatment, and terms of seller-servicer contracts
  • Conduct periodic reviews of samples based on lenders of different sizes to determine whether disparities exist with respect to pricing and other GSE policies

Counter-party Risk Standards

CHLA believes that the GSEs have a responsibility to manage their counter-party risk responsibly. However, CHLA believes that such policies should be directly related to specific risks with respect to indemnification and advance responsibilities. Therefore, in July, 2014, CHLA sent a letter to FHFA strongly criticizing the recent FHFA IG report alleging increased GSE risk of dealing with smaller lenders – pointing out that that IG Report started out with pre-conceived concerns about smaller lenders, and provided no real evidence to back up their conclusions.

Single Security

CHLA applauds the ongoing efforts of the FHFA and the GSEs to create a Single Securitization Platform and a Single Security for GSE loans. Such a development would promote market concentration, make it harder for TBTF banks and other institutions to dominate mortgage markets, and in the process, promote consumer choice.

Risk Sharing

CHLA supports the concept of risk sharing in order to reduce taxpayer risk for government insured mortgage loans – but is concerned that if not implemented properly, this could encourage mortgage market concentration among a few TBTF banks and reduce access to credit for consumers. Concerned about prospects for Congressional action, CHLA wrote the FHFA in July, 2014, asking the Agency to research how to preserve a cash window under various mortgage reform alternatives, and also to encourage the GSEs to engage in an accelerated program of risk sharing pilots in a manner that:

  • Preserves the ability of small and mid-sized lenders to securitize loans
  • Prohibits vertical integration, to prevent big firms from leveraging their securitization ability to exclusively deal with their mortgage affiliates
  • Prohibits volume discounts
  • Tests out a loan level guarantee, e.g. through PMIs, to explore the effective use of up-front risk sharing

[This material has been prepared by the CHLA for informational purposes only, and may not be used for public use without the express written consent of CHLA]