FOR IMMEDIATE RELEASE
ICBA: Secondary Mortgage Market Must Be Impartial, Provide Equitable Access and Pricing
Washington, D.C. (June 28, 2011)—Jack Hartings, president and CEO of The Peoples Bank Co. in Coldwater, Ohio, and a member of the Independent Community Bankers of America (ICBA) Executive Committee, today told Congress that the secondary mortgage market must be impartial and provide equitable access and pricing to all lenders regardless of size or lending volume. He also stressed that all originators must have the option to retain servicing after the sale of a loan.
“Any broad-based recovery of the housing market must involve community bank mortgage lending,” Hartings said in his testimony before the Senate Banking Committee. “Community bank mortgage lending, which represents about 20 percent of the market, is often concentrated in the rural areas and small towns not effectively served by the large banks—and for many borrowers a community bank loan is the only mortgage option they have.”
Hartings went on to say that mortgage lending is about 80 percent of his bank’s business. “The secondary market allows my bank to meet customer demand for fixed-rate mortgages while managing the interest rate risk these loans carry,” he said. “Having a robust secondary market allows my bank to better serve our customers, and supports our local economy.”
Hartings also pointed out that the mortgages his bank and the community banking sector as a whole sell to the secondary market perform extremely well. “Community bank loans perform better in all market conditions and contribute to the safety and soundness of the secondary markets,” he said. “The key to the performance of community bank mortgages is diligent, community-based underwriting and servicing.”
“As we listen to the debate over secondary market reform, community banks are particularly alarmed by proposals that would simply transfer the important functions of Fannie Mae and Freddie Mac to a small group of megabanks—often the same ones whose abusive loan terms, faulty underwriting and exotic securitizations contributed to the financial meltdown,” he said. “Such proposals would intensify systemic risk and moral hazard through further concentration of assets, and increase dangerous consolidation of the mortgage industry, and result in less competitive rates and fees, and more limited product choice.”
“With the fragile state of the housing sector and our economy, we have to be cautious, we have to get it right and cannot afford to experiment with theoretical reforms that could fail in the marketplace,” Hartings concluded.
For more information and to read Hartings’ testimony, please contact Aleis Stokes at (202) 821-4457 or visit www.icba.org.