The Independent Community Bankers of America told Congress during a hearing on Tuesday that community banks’ continued access to the secondary mortgage market is critical to allow the institutions to meet consumer lending needs.
Congress has considered proposing opportunities for smaller institutions to enter the market—the result of many small lenders’ decisions to diversify their secondary mortgage market options, HousingWire reports.
Lawmakers proposed an expanded system that is similar to the structure of the Ginnie Mae model, in which lenders are responsible for obtaining credit enhancements before they receive a government guaranty.
In his testimony before the Senate Banking Committee, ICBA Chairman Bill Loving told Congress that while the current structure has worked for community banks, the organization is open to a less concentrated housing finance system.
“In reforming the housing finance system, policymakers must be careful not to create a new system that eradicates liquidity for all but the few largest players, limits access to the market or narrows options for smaller lenders, and imposes requirements that make it too costly for smaller lenders and servicers to participate,” Loving said.
Community banks represent approximately 20 percent of the mortgage market. Loving pointed to a recent survey in which 30 percent of community banks said they sell 50 percent or more of the mortgages they originate into the secondary mortgage market.