The Credit Union National Association (CUNA) supports the Federal Housing Finance Agency’s (FHFA) proposal to require the Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac to rely upon larger, multiple-lender pools, CUNA stated in a written letter.

CUNA responded to FHFA’s request for information on the pooling practices for the GSEs’ Uniform Mortgage-Backed Security (UMBS).

“CUNA recognizes and applauds FHFA’s efforts to ensure the efficiency and effectiveness of the UMBS in order to facilitate the security’s smooth transition into the To Be Announced (TBA) market,” the letter reads. “Because a key component of CUNA’s Credit Union Principles for Housing Finance Reform is ensuring that the transition from the current system to any new housing finance system is reasonable and orderly, we encourage the agency to continue its efforts to maximize the effectiveness of the UMBS, while promoting access for credit unions and other smaller lenders to the enterprises’ secondary market programs.”

CUNA’s letter noted that credit unions’ mortgage lending grew from 6 percent to 13 percent of the overall primary mortgage market between 2015 and 2017.

 “To meet this growing demand, credit unions must be able to efficiently and affordably access the secondary mortgage market. With significantly fewer tools than banks to mitigate interest-rate risk, access to the secondary mortgage market plays a critical role in credit unions’ efforts to increase liquidity, while effectively managing their balance sheets,” CUNA wrote in its letter. “In fact, the GSE securitization process is a key tool in many credit unions’ tool boxes when looking to ensure their institution’s safety and soundness… Accordingly, any disruption in the TBA market would pose a threat to the ability of credit unions to effectively access the secondary market to increase liquidity and manage their bottom line.”

Given the importance of the TBA market to credit unions and their members, CUNA is pleased that the FHFA has proposed a requirement that the vast majority of TBA-eligible loans acquired in a specified, aligned timeframe should be aggregated and formed into large multi-lender pools.

The helps better manage prepayment risk, encouraged the GSEs to continue actively doing business with credit unions and other smaller lenders through cash commitment windows in order to include those mortgages within multi-lender pools.

The FHFA recently extended the deadline to comment on pooling practices for the UMBS through Jan. 21.