The Independent Community Bankers of America (ICBA) has issued a white paper detailing steps the government should consider in GSE reform that would support small, independent banks and their role in the housing market.
“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,” said Ron Haynie, SVP of mortgage finance policy at ICBA. “ICBAand 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.”
The white paper outlined ICBA’s recommendations for a stable secondary mortgage market, including that the market should “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, provide originators the option to retain servicing and ensure servicing fees are reasonable…[and] maintain an explicit government guarantee against catastrophic loss.”
The ICBA said that in addressing the problems that led to the receivership of the GSEs, congress runs the risk of making the secondary mortgage market accessible only to those large lenders who bear the responsibility for the last housing crisis.
“Such a market would offer fewer choices, commodity‐only products, a degraded consumer experience, and an absence of mortgage options for borrowers in rural markets,” theICBA said. “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.”