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Mica assesses GSE deal impact on credit unions
WASHINGTON (9/10/08)—Credit Union National Association (CUNA) President/CEO Dan Mica said Monday credit unions are already seeing conforming mortgage rates falling due to the government’s seizure of control of over housing giants Fannie Mae and Freddie Mac. “We don’t yet expect any relaxation of credit standards or fees from the (government-sponsored enterprises), but because of lower rates, conforming mortgages will be more attractive to credit union members than they have recently become,” Mica noted, putting recent events into perspective for credit unions. Another short-term effect of restored confidence in the debt obligation of Fannie and Freddie—brought by the change of control—is that other mortgage lenders may become more competitive with confidence restored to the agency mortgage-backed securities market. “More broadly, restoring this important source of mortgage credit will remove one--but certainly not all--of the negative forces in the housing market,” Mica said. However, Mica warned, the long-term ramifications of the government’s action on the mortgage finance market -- and credit unions -- are unclear for now. “All we can say at this point is that things will never return to the state they had evolved by the beginning of this decade, but all the final changes are at his point speculation. However, we can say that the greater the eventual cost to the Treasury of resolving the mess, the greater will be the changes to the future structure of these government-sponsored enterprises or their successor organizations,” Mica added. As reported by Treasury, Fannie Mae and Freddie Mac have outstanding debt and mortgage-backed securities that total about $5 trillion. Due to concerns that the GSEs may not have sufficient capital to cover potential losses in the loans they hold or guarantee, and the devastating effect the failure of the GSEs would have on mortgage finance and an already reeling residential real estate market, the new Federal Housing Finance Agency was been appointed as conservator of the two GSEs. The Treasury Department has provided a number of concise fact sheets describing the conservatorship program. Use the resource link below to access that information.
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