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Mortgage Finance Landscape To Change, But To What?
PHOENIX, Ariz. (11/5/13)--The mortgage market will likely be framed by new regulatory guidelines and market structure in the next few years, according to Alan Bahr, director of lending at the CUNA Mutual Group.

Speaking at the CUNA Lending Council annual conference, Bahr said that four industry-wide issues must be addressed in the wake of the subprime mortgage crisis--the government's role in mortgage finance, the future of Fannie Mae and Freddie Mac, the securitization of loans, and the manner through which financial institutions attract private capital. (See related News Now story: CUNA Frames CU Housing Finance Reform Priorities For Senate Today.)

Despite the pressing issues, Bahr intoned that the industry and the federal government still have more questions than answers.
He said that a consensus is forming in Washington that the federal government should maintain a role in mortgage finance.
"Fact is, very few borrowers can raise 30-year, fixed-rate money," Bahr pointed out. "Though private capital solutions are preferred by many, the capital markets don't like to provide long-maturity, fixed-rate funding. The only reason 30-year mortgages are viable today is that Fannie and Freddie back them up."
He added that while industry stakeholders want to see Fannie and Freddie "wind down," Wall Street and "those who gave us the subprime mess" would almost certainly fill the void--an outcome that should inform the stakeholders' calculus.
Bahr said that a new, uniform way of packaging loans into investment vehicles is also needed.

Without addressing the other issues first, he said that the industry can't even begin to discuss how to attract more private capital.

In the face of possible changes, Bahr urged credit unions to listen to credit union service organizations and other associations that have close relationships with regulators.

"Credit unions need to stay ahead of what's being offered in the marketplace so they don't lose their market share," he commented. "Select someone in your credit union to keep abreast of the new programs and products, and then disseminate that information to those who can take action on it."

He warned that mortgage finance could become considerably more complex in the future, but said credit unions could find sympathy from regulators in Washington, because they have demonstrated awareness about smaller lenders in recent years.

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