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As the Federal Housing Finance Agency (FHFA) considers minimum liquidity and funding requirements for the government-sponsored enterprises (GSEs), NAFCU's Ann Kossachev urged the agency "to thoroughly consider the impact of this liquidity requirements rule on the cost and availability of mortgage loans for the most vulnerable consumers."

The FHFA issued the proposed rule in December, which would also create daily management reporting of the GSEs' liquidity positions monthly public disclosure reporting requirements, and more. FHFA Director Dr. Mark Calabria indicated the rule is part of a combined effort with the GSEs' capital rule to ensure the enterprises are well-positioned to survive times of stress with limited impact on consumers and the housing market.

Kossachev, NAFCU's director of regulatory affairs, reiterated NAFCU's support for the GSEs to rebuild capital and be in safe, sound financial condition before exiting conservatorship. However, "it is critical that any regulatory changes during this process do not impinge on credit unions' ability to offer affordable mortgage loans to their members and sell their mortgage loans to the GSEs at a fair and reasonable price."

A concern for the association is the large role non-bank mortgage servicers play in the housing market and their risk of liquidity shortfalls. To ensure the health of the mortgage market amid the coronavirus pandemic and beyond, Kossachev also called on the FHFA to strengthen financial eligibility requirements for non-bank mortgage servicers and ensure transparency and proper oversight in its efforts, which is a component of the association's fight for a level playing field between credit unions and non-traditional financial institutions.

"It is critical to the safety and soundness of the entire housing finance ecosystem that non-bank servicers, which comprise the most rapidly growing segment of the mortgage market, are held to stringent capital and liquidity requirements," Kossachev stressed. "Without such strong standards, the credit union lenders for which they service loans, consumers, and investors in mortgage-backed securities, are all likely to be negatively impacted. Even beyond financial eligibility standards, in the interest of transparency and to demonstrate commitment to oversight, the FHFA should provide regular reports on their progress in enhancing oversight of non-bank mortgage companies, including their impact on lending for affordable housing."

Several of the considerations Kossachev outlined in response to the GSEs' liquidity proposal reinforce NAFCU's housing finance reform priorities:

• Provide Congress-mandated protections: NAFCU has consistently called on the FHFA and other federal departments to work with Congress on housing finance reform to codify certain safeguards before removing the GSEs from conservatorship, such as providing smaller lenders like credit unions with "guaranteed, fair access to the secondary mortgage market."
• Limit increased costs: Kossachev flagged that guarantee fees and other mortgage costs may increase as the FHFA implements liquidity requirements, capital requirements, and changes to the Preferred Stock Purchase Agreements (PSPAs), which will add to the GSEs' compliance costs. "Increased guarantee fees on the sale of loans should not be the trade-off for the short-term liquidity build-up and other changes at the GSEs as this will serve to limit access to credit to the communities that are most in need," Kossachev wrote. "Now is not the time to impose additional costs on borrowers who are relying on access to mortgage credit through a loan that will be sold to the GSEs." She directly asked the FHFA to "transparently communicate its expectations regarding guarantee fees" on a consistent basis going forward.
• Maintain access to the cash window: "NAFCU appreciates the FHFA’s focus on supporting small lenders in the event of an economic stress event, specifically through an increased cash outflow through cash window sales, by purchasing more U.S. Treasury securities and other high quality liquid assets," Kossachev said. However, she cautioned against the liquidity requirements creating trade-offs that limit access to the cash window.
• Support low-, moderate-income borrowers: While incentives for excessive risk taking should be eliminated, Kossachev asked the FHFA to consider pilot programs for low- or zero-down payment mortgage loans, as well as other products, to help very low-, low-, and moderate-income borrowers build wealth.

NAFCU will continue to advocate on behalf of the credit union industry's and its members' best interests in the housing finance system.