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ICBA: Housing finance reform should ensure bank access to secondary mortgage market

ICBA logoThe Independent Community Bankers of America testified before Congress on Tuesday on the importance of ensuring community banks’ continued access to the secondary mortgage market in the creation of housing finance reform policy.

ICBA Vice Chairman Jack Hartings said the Housing Finance Reform and Taxpayer Protection Act, which was introduced by Sen. Bob Corker (R-Tenn.), would help ensure that community banks have access to the secondary mortgage market without requiring them to take on extra risk and costs associated with securitizing loans.

The ICBA said it support several provisions of the legislation, including those that would establish a Federal Mortgage Insurance Corp. guarantee to ensure market safety in times of economic stress; limit issuers to no more than 15 percent of outstanding guaranteed securities in an effort to reduce market concentration; continue to authorize FHL banks to issue mortgage-backed securities; and establish a mutual securitization firm to allow small lenders to sell loans for cash and retain servicing rights.

Hartings said community banks, which comprise approximately 20 percent of the mortgage market, help stabilize the secondary mortgage market, adding that continued access will allow them to keep lending.

“An aggressive role for the government in housing is no longer a viable option,” Hartings, who is also president of the Peoples Bank Co. in Ohio, said. “Community banks are prepared to adapt and thrive in this environment. But whatever replaces the secondary market system must have features to allow community banks to continue to thrive as mortgage lenders and to serve their communities.”

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