GSE LENDING: OPERATIONAL CONCERNS
- ICBA will actively engage the Federal Housing Finance Administration (FHFA) and the GSEs regarding overly burdensome policies and requirements that increase the cost and operational burden of using the GSEs and contribute to the consolidation of GSE business with the largest lenders. Key areas of focus in these discussions are:
- Seller/servicer eligibility
- Quality control/ loan manufacturing policies and requirements
- Buyback (both performing loans and non-performing loans)
- Underwriting and property appraisal guidelines and policies that discriminate against properties and borrowers in rural or small town markets
- Mortgage servicing requirements from the GSEs should not conflict with the community bank business model and cost structure.
- ICBA objects to the housing GSEs’ aggressive demands on community banks for the repurchase of transferred residential mortgages for minor, technical violations of underwriting agreements that had no bearing on loan quality at the time of underwriting.
- The Federal Housing Finance Agency, the housing GSEs, the Department of Housing and Urban Development, the Federal Housing Administration, and the CFPB should not develop or implement any rule or practice that by design or in effect would limit participation by community banks in the mortgage market or in government programs intended to promote housing.
Servicing. Community bank mortgage loan servicing is based on close ties to customers and communities. Community banks have not perpetrated recent abuses in servicing and should be exempt from any prescriptive standards that make servicing too costly for them.
Servicing helps community banks remain competitive in the mortgage origination business. Any changes to mortgage servicing standards or compensation should not encourage additional consolidation of the mortgage servicing business in the largest aggregators.
Repurchase Demands. ICBA objects to the housing GSEs’ aggressive demands on community banks for the repurchase of transferred residential mortgages for minor, technical violations of underwriting agreements that had no bearing on loan quality at the time of underwriting. Further, ICBA objects to increasing levels of Quality Control reviews that penalize small volume sellers that result in virtually 100 percent of a community banks loans being reviewed. The GSE’s need to temper their reviews based on the quality of the loans sold rather than to just a basic sample size.
Staff Contact: Ron Haynie