Editor’s Note: GSE Reform Ideas Detailed

The Community Home Lenders of America (CHLA) started circulating an independent mortgage bank (IMB) sign-on letter – staking out key policy recommendations in any Fannie/Freddie exit from conservatorship – in order to protect IMBs, and smaller lenders in particular. CHLA is inviting any IMB to sign on to the letter.

“We write as independent mortgage banks (IMBs) – non-bank mortgage loan originators – to identify essential elements of a Fannie Mae and Freddie Mac exit from conservatorship,” the letter opened. “We do so in the wake of reports that the Trump Administration plans a public offering of these two entities later this year.”

The letter lists the following five recommendations:

>>G FEE PARITY AND A COMPETITIVE CASH WINDOW

>>NO WALL STREET BANK CHARTERS FOR GSE LOANS

>>KEEP FANNIE AND FREDDIE SEPARATE UNDER A UTILITY MODEL

>>GSES SHOULD MAINTAIN CRITICAL MORTGAGE LOAN PRODUCTS

>>THE GSES SHOULD PURCHASE MBS TO LOWER MORTGAGE RATES

In October 2020, CHLA spearheaded a similar IMB sign-on letter asking regulators to turn the informal policy at the time of G Fee parity into a more permanent requirement.

Three months later, the Trump Administration did exactly that – adopting very strong language on G Fee parity and a cash window into the PSPA agreements. The first ask in this IMB sign-on letter is that this language “be retained and incorporated to the strongest degree possible in the legal framework used for any GSE conservatorship exit.”

Other provisions in the letter take a strong stand against merging Fannie and Freddie and against granting new GSE charters to Wall Street Banks.