IMBs urge Treasury, FHFA to preserve guarantee-fee parity

"Thus, the PSPA G-fee parity/cash window provisions should be retained and incorporated to the strongest degree possible in the legal framework used for any GSE conservatorship exit. The signatories of the letter spearheaded by the Community Home Lenders of America (CHLA) are IMBs, a group of lenders that account for 83% of all mortgage originations and 75% of all loans sold to Fannie and Freddie."

"For example, they urged regulators to block Wall Street banks from obtaining GSE charters, stressing that competition should occur at the loan origination level and not at the level where a GSE guarantee is granted to a handful of mega-lenders. On the prospect of a Fannie-Freddie merger, the IMBs endorsed keeping the entities separate under a utility-style model, with caps on excessive G-fees and limits on riskier loans an approach they argue would encourage competition and accountability."

"They also warned that, under shareholder pressure, the GSEs could scale back purchases of lower-volume loans with thinner revenues. They urged the agencies to maintain critical mission-based products for condominiums, second homes, manufactured housing, investor-owned properties and loans in rural markets. Finally, the lenders suggested the GSEs could help borrowers by conducting temporary, opportunistic purchases of MBS to cut mortgage rates, while mortgage rates remain at historically high margins over 10-year Treasuries."

A conservatorship exit could incentivize a return to practices that unfairly favor mega-lenders, prompting calls to retain PSPA G-fee parity and cash window provisions. IMBs, representing a large share of mortgage originations and sales to Fannie and Freddie, seek protections to preserve a level playing field for smaller lenders. Requests include blocking Wall Street banks from obtaining GSE charters and keeping Fannie and Freddie separate under a utility-style model with caps on G-fees and limits on risky loans. Concerns also include potential scaling back of lower-volume loan purchases and preservation of mission-based products and targeted MBS purchases to lower rates.

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