CUNA Comment Letter

Notice and Request for Information: Public Input on Reform of the Housing Finance System

July 20, 2010

Mr. Gary Grippo
Deputy Assistant Secretary
Fiscal Operations and Policy
U.S. Department of the Treasury
1500 Pennsylvania Avenue, N.W. – Room 2112
Washington, DC 20220

RE: Notice and Request for Information: Public Input on Reform of the Housing Finance System

Department of the Treasury
Department of Housing and Urban Development
[EDocket Number: TREAS-DO-2010-0001; HUD-2010-0029]

To Whom It May Concern:

The Credit Union National Association (CUNA) appreciates the opportunity to submit comments on the notice and request for information with regard to the reform of the housing finance system. CUNA represents approximately 90 percent of our nation’s 7,800 state and federal credit unions, which serve approximately 92 million members.

Summary of CUNA’s Comments


Although many credit unions have been affected by the collapse of the mortgage market, their historic role as not-for profit financial institutions dedicated to the needs of their members, along with their conservative lending practices, have enabled them for the most part to continue to provide mortgage loans for their members and to help them reduce their payments by refinancing their current loans. However, in order to fully recover from the worst economic crisis since the Great Depression, we agree that the federal government has a significant role to play with regard to reshaping the housing finance system to ensure we do not repeat the mistakes that led to this crisis and that this role should continue after this new system is on place. For example, Freddie Mac and Fannie Mae have and continue to perform a valuable service in providing the secondary market for mortgages that have facilitated the ability of credit unions to serve their members by providing mortgage loans that meet their housing needs.

Although we support a robust role for the federal government in a new housing finance system, we also believe that the focus of this system should not necessarily be on increasing the rate of homeownership. Rather, the focus should be on ensuring that consumers receive mortgage loans that they can afford. This has been and will continue to be the overriding goal of credit unions that make these types of loans and this should also apply to all other segments of the mortgage lending market. We understand this means that a number of consumers will need to rent, rather than own their homes. We not only believe that this should be acceptable, but would certainly be a much better outcome than providing loans these consumers cannot afford, as evidenced by the recent mortgage crisis.

As the Department of the Treasury (Treasury), the Department of Housing and Urban Development (HUD), and other federal agencies proceed in developing a plan to reshape the housing finance system, we urge you to recognize the vital role that credit unions have assumed during the current mortgage crisis in providing loans while other lenders have severely restricted their mortgage lending activities. Any new housing finance plan should ensure that all types of financial service providers can take full advantage of the opportunities to sell their loans into the secondary market and to receive services from the Federal Home Loan Banks or other entities that may be created under a new housing finance plan.

The new housing plan should also facilitate and recognize the value of all loan products. For example, credit unions make a significant number of manufactured housing loans, and we have heard that it has been difficult for them to use these loans as collateral for certain types of borrowings from Federal Home Loan Banks. We believe this type of lending will become more prevalent in the future and should be supported in any new plan to restructure the housing finance system.

To ensure that all types of financial institutions can fully participate under the new housing finance system, we believe it is critical that Treasury, HUD, and the other federal agencies involved in developing this plan meet regularly with all segments of the financial institutions industry, including credit unions. CUNA would be pleased to participate in these meetings and to identify specific credit unions that would also participate.

Our other significant concern as the Obama Administration moves forward with developing a new housing finance plan is the additional burdens that may be imposed on credit unions as a result. Credit unions and other heavily regulated financial institutions are subject to significant legislative and regulatory burdens, which have been compounded in recent years. Just since the beginning of 2008, credit unions and other financial institutions have been subject to new, and very significant, requirements with regard to mortgage lending, credit cards and other types of open-end lending, internet gambling, the Bank Secrecy Act, the Fair and Accurate Credit Transactions (FACT) Act, gift cards, overdraft protection plans, student loans, and accounting.

In addition, the new Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) will impose even more burdens on credit unions, which were in no way responsible for the financial crisis that this Act is intended to address. These include new limitations on interchange fees, additional collection requirements on consumer loans, new disclosures under the Truth in Lending Act and the Real Estate Settlement Procedures Act, additional disclosure requirements for remittances, and new Home Mortgage Disclosure Act reporting requirements.

As with other smaller financial institutions, a significant number of credit unions have very limited staff, many of whom have multiple responsibilities and tasks, and are not in a position to take on significant, additional regulatory burdens. Credit unions are also not in a position to incur the substantial, additional costs that may be needed if additional software and staff training are required to comply with any new regulatory burdens, especially as many of them are still trying to recover from the current economic crisis. We urge that these factors be taken into very careful consideration as you move forward with a plan to reform the housing finance system.

CUNA recognizes that Congress and the Obama Administration are in the very earlier stages of developing a specific housing finance plan. As the process of developing a new housing finance system unfolds, CUNA will be working closely with our member credit unions to develop specific positions in response to the proposal that will be issued by the Obama Administration and in response to future legislative proposals.

Thank you for the opportunity to comment in connection with the process of reforming the housing finance system. If you have questions about our comments, please contact Senior Vice President and Deputy General Counsel Mary Dunn or me at (202) 638-5777.

Jeffrey P. Bloch
Senior Assistant General Counsel