In a letter to the Treasury and Department of Housing and Urban Development (HUD), the American Bankers Association (ABA) made recommendations geared toward the future of Government Sponsored Enterprises (GSEs).
The letter stated ABA’s belief that there is too much government involvement in housing finance matters. Recommendations included a path to transform the housing finanace role provided by GSEs.
“The end goal we envision is a housing finance market in which more than half of mortgage finance occurs without federal secondary market guarantees of any type,” said Frank Keating, ABA’s president and CEO, in the letter. “That vision may take years to attain. However, it is essential that we start taking incremental steps toward these goals, and trust in our ability to make mid-course corrections as we progress.”
Policymakers should create a well-regulated covered bond market and should enhance the Federal Home Loan Banks to help provide advances to private market portfolio lenders with minimal taxpayer exposure, advised ABA.
“A well-regulated private market should be the desired financing source for the bulk of borrowers whose income and credit rating qualify them for conventional financing,” said Keating.
Among other ABA recommendations for the Treasury and HUD: an increase in “G fees,” or guarantees fees, in order to reduce government involvement and provide government compensation; and the creation of more reasonable loan limits for GSE purchases.
View the full letter.
Written by Elizabeth Ecker