“A conservatorship exit could create incentives to return to practices which unfairly favor mega-lenders,” the letter states. “Thus, the PSPA G-fee parity/cash window provisions should be retained and incorporated to the strongest degree possible in the legal framework used for any GSE conservatorship exit.”
The signatories of the letter — spearheaded by the Community Home Lenders of America (CHLA) — are IMBs, a group of lenders that account for 83% of all mortgage originations and 75% of all loans sold to Fannie and Freddie. Their requests are aimed at preserving a level playing field for smaller lenders.
For example, they urged regulators to block Wall Street banks from obtaining GSE charters, stressing that competition should occur at the loan origination level “and not at the level where a GSE guarantee is granted to a handful of mega-lenders.”
On the prospect of a Fannie-Freddie merger, the IMBs endorsed keeping the entities separate under a utility-style model, with caps on excessive G-fees and limits on riskier loans — an approach they argue would encourage competition and accountability.
They also warned that, under shareholder pressure, the GSEs could scale back purchases of lower-volume loans with thinner revenues. They urged the agencies to maintain “critical mission-based” products for condominiums, second homes, manufactured housing, investor-owned properties and loans in rural markets.
Finally, the lenders suggested the GSEs could help borrowers by conducting “temporary, opportunistic purchases of MBS to cut mortgage rates, while mortgage rates remain at historically high margins over 10-year Treasuries.”