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CUNA Backs GSE Credit Risk Guarantee Amendment
WASHINGTON (3/25/13)--The Credit Union National Association on Friday joined several financial services and real estate industry partners to support an amendment that would ensure that Fannie Mae and Freddie Mac credit risk guarantee fees are no longer used to offset the costs associated with unrelated policies that increase the deficit.

The amendment was introduced by Senate Banking Committee Chairman Tim Johnson (D-S.D.) and Ranking Committee Member Mike Crapo (R-Idaho) last week.

In a letter to the two legislators, CUNA and others noted that guarantee fees are a critical risk management tool used by Fannie Mae and Freddie Mac to protect against losses from faulty loans, and should be used only to manage the companies' credit risk. Increasing guarantee fees for other purposes effectively taxes potential homebuyers and consumers wishing to refinance their mortgages, the letter added. Fee increases unrelated to housing could also act to hinder the necessary reforms required of the housing finance system in the years ahead, the letter said.

Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco earlier this month said that agency will begin to build a new securitization infrastructure, including a joint venture to handle mortgage securitization, and contract Fannie Mae and Freddie Mac's dominant presence in the marketplace while simplifying and shrinking some of those firms' operations.

As requested by the FHFA, Freddie Mac last week released single-family loan-level credit performance data on 30-year fixed-rate mortgages. Freddie Mac said the dataset covers approximately 15.7 million fully amortizing fixed-rate single-family mortgages originated between January 1, 1999, and December 31, 2011, representing 53% of total mortgage acquisitions made during that period.

Freddie Mac in a release said the data will help to increase transparency, which helps investors build more accurate credit performance models in support of potential future single-family credit risk-sharing initiatives.

A range of mortgage market reforms have been discussed in Washington, including almost completely privatizing the housing finance system, limiting the government's intervention in the mortgage market to times of financial distress, and using a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages.

CUNA has repeatedly encouraged the FHFA to ensure that any changes to secondary mortgage market structure allow credit unions and other small issuers to maintain full and unrestricted access to that market. CUNA has also highlighted the importance of preserving 30-year, fixed-rate mortgages and ensuring that the secondary market is strong enough to weather economic adversity.
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