Housing Finance Reform


It has been nearly 7 years since the federal government took control of Fannie Mae and Freddie Mac from their stockholders in a process known as conservatorship. Since that time, the future of the Government-Sponsored Enterprises (GSEs) and the secondary mortgage market has become a topic of debate among lawmakers and the Administration.

NAFCU is committed to educating Congress and the Administration about the positive impact the secondary market has had on the credit union community and the role credit unions play in ensuring the safety and soundness of our nation's housing market. In any housing finance reform efforts, NAFCU will push for equal access to the market for credit unions and fair pricing based on loan quality as opposed to volume.

Recent Activity on Capitol Hill

The FHFA has come under political pressure to shift its policy on principal forgiveness for certain underwater borrowers whose loans are owned or guaranteed by Fannie Mae or Freddie Mac. NAFCU has expressed concerns about this policy to the extent that it could enable or precipitate strategic defaults.

Credit unions stand on the forefront of the battle to keep families in their homes, and NAFCU has deep concerns about any government program that would encourage some borrowers that have the ability to repay to instead walk away from their home and cause credit unions and their members losses that cannot be recouped.

Relative to Fannie Mae and Freddie Mac, both the House Financial Services and Senate Banking Committees took up and passed reform legislation during the 113th Congress. While the respective bills did not reach a conference committee or become law, both pieces of legislation were comprehensive and significant. The House bill seriously curtailed the government's role in the housing market, while the Senate bill maintained a larger government role and set up a special mechanism for small community lenders to access the secondary market. NAFCU has outstanding concerns with both proposals and will continue to advocate for a system rewarding loan quality over quantity that ensures direct credit union access to the market without having to go through larger lenders such as banks. Reforming Fannie Mae and Freddie Mac has yet to be a frontline issue during the 114th Congress.  

NAFCU's Position on Housing Finance Reform

Government-Sponsored Enterprises, specifically Fannie Mae and Freddie Mac, enable credit unions to obtain the necessary liquidity to create new mortgages for their member-owners by utilizing the secondary market.

The Federal Home Loan Banks (FHLBs) allow credit unions to meet their liquidity needs through timely loans. The availability of these stable and reliable sources of funding has facilitated credit unions' ability to offer new mortgage loans and related credit to their members, many of whom have been denied access to homeownership by other lenders.

Thus, both GSEs and FHLBs serve as valuable partners in credit unions' efforts to meet their members' needs, particularly with regard to mortgage loans. This continues to be true in the current economic environment.

Issue Background Information

The Housing Finance Reform and Taxpayer Protection Act (S. 1217) championed by Bob Corker (R-TN) and Mark Warner (D-VA) would wind down Fannie Mae and Freddie Mac and replace the GSEs with a privately capitalized system that aims to preserve market liquidity and protect taxpayers from future economic downturns. Of note, the bill does include a narrow government guarantee on MBS and would create a small lender mutual to help ensure credit union access to the market.

Timeline of legislation and events:

  • November 2013: John Harwell of Apple FCU testified before the committee on housing finance reform issues from a small lender perspective. He noted that the Corker-Warner legislation is a good first step in the debate. Mr. Harwell also reiterated how important credit union access and fair pricing for credit union loans are, should reforms be made to the secondary mortgage market.
  • August 2013: President Obama outlined core housing goals of the Administration and urged Congress to come together and deal with this issue in a bipartisan way. Of significance, he advocated to maintain consumer access to products such as the 30-year fixed rate mortgage and noted that credit unions and other small institutions "must be given the same opportunity to compete in any future system to ensure that consumers have the broadest number of options."
  • July 2013: Janice Sheppard of Southwest Airlines FCU testified before the House Financial Services committee on the Protecting American Taxpayers and Homeowners (PATH) Act. She reiterated to lawmakers how critical secondary mortgage market access is for our nation's credit unions. Ms. Sheppard also testified that any future system must ensure credit union loan quality is taken into account and larger lenders don't receive deep discounting based on mortgage volume as opposed to quality.
  • July 2013: House Financial Services Chairman Jeb Hensarling (R-TX) presented the committee with draft legislation called the PATH Act. While the legislation, subsequently introduced by Scott Garrett (H.R. 2767), would make significant positive reforms to mortgage rules being promulgated by the Consumer Financial Protection Bureau, it also would phase out Fannie Mae and Freddie Mac over a five-year period and seriously curtail the government's role in the housing finance system.

    While NAFCU has outstanding concerns about the PATH Act, which was passed out of the Financial Services Committee in July 2013, NAFCU will continue to work with Chairman Hensarling and other interested parties as the bill could be considered on the House floor in the 113th Congress.
  • June 2013: In the Senate Banking Committee, Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) focused on an FHA solvency measure earlier in the Congress and have now turned their attention to larger housing finance reform issues. A bipartisan group of Banking Committee members put together a housing finance reform bill introduced in June 2013.
  • September 2008: After turmoil in the housing, mortgage, and financial markets raised doubts about the future of Fannie and Freddie, both entities were placed under conservatorship. Lawmakers also created the Federal Housing Finance Agency to replace the Office of Federal Housing Enterprise Oversight as the safety and soundness regulator for the GSEs. The goal of conservatorship is to preserve GSE assets and return to sound financial condition, allowing the conservatorship to end.

Recent Media Outreach

NAFCU has stayed at the forefront of this issue and continued to champion credit unions in major media nationwide.

NAFCU Statement on Mark-Up of Housing Finance Reform Bill (May 15, 2014)

White House applauds housing reform bill, but no stand on vote (The Hill, May 15, 2014)

Johnson-Crapo reform bill voted to Senate floor (HousingWire, May 15, 2014)

Senate Banking Panel Approves Bipartisan GSE Bill (Credit Union Journal, May 15, 2014)

Housing Finance Reform Clears Committee (Credit Union Times, May 15, 2014)

Stakeholders position themselves ahead of Johnson-Crapo markup (The Hill, April 14, 2014)

Sens. Johnson, Crapo Unveil Senate GSE Agreement (Credit Union Journal, March 11, 2014)

Lenders fear squeeze from mortgage rules (The Hill, Jan. 14, 2014)

FHFA to Delay Increase in Mortgage Fees By Fannie, Freddie (Wall Street Journal, Dec. 20, 2013)

Recent Policy Letters

Read recent letters from NAFCU to members of Congress on key housing finance reform issues that affect credit unions and their members.

2-10-2015 NAFCU Letter to HFSC on FHA Oversight

1-26-2015 NAFCU Letter to the House Financial Services Committee

4-28-2014 NAFCU letter to Sens. Johnson, Crapo on Housing Reform Markup 

4-11-2014 NAFCU-ICBA-CUNA joint letter to Sens. Johnson, Crapo on GSE reform

View all NAFCU policy letters

Updated June 2015