News By Tag
News By Location
Large Lender Access to CSP Challeneged
By: Community Mortgage Lenders of America
The question is whether the CSP will be available to big banks for securitizing mortgages, which would reverse course and allow big banks a government sanctioned advantage over small lenders.
In a May 13, 2014 statement, FHFA Director Mel Watt said: “First, after extensive discussion within FHFA and with [Fannie Mae and Freddie Mac], we have clarified the agency’s top objective for the [CSP] is to make sure that it works for the benefit” of these Government Sponsored Enterprises or GSEs.
More recently, however Watt signaled a policy reversal stating the CSP would be “adaptable for use by other secondary market participants in the future.”
In a June 24, 2015 joint letter to Watt, CMLA Executive Director Glen Corso and CHLA Executive Director Scott Olson pointed out small lenders cannot invest large fixed sums in staffing and systems to take advantage of issuing and hedging securities. Instead, the largest banks already have the necessary infrastructure to leverage the government funded CSP and regain the market dominance they held prior to the GSEs failure.
The GSEs historically provided the largest customers -- primarily bank and bank-owned lenders – with discounted guaranty fees, which empowered them to gain more market share from smaller lenders that paid larger fees.
In the last several years, at the urging of CHLA, CMLA and other organizations representing small and mid-sized lenders, the GSEs, under FHFA’s direction, have significantly reduced these discounted guaranty fees. The result has been a significant shift in market share with a reduction in the combined share of the large bank lenders and a corresponding increase among a much larger group of mid-sized and small lenders.
Permitting private lender participation in the CSP could effectively reverse the market share balance the FHFA helped create and restore large bank dominance in the mortgage market.