Access the Government-Sponsored Secondary Mortgage Market

Position

ICBA will actively engage the Federal Housing Finance Administration (FHFA) and the GSEs regarding overly burdensome policies and practices that increase costs and operational burdens for community banks to access the GSEs, which reduces liquidity in rural or small-town communities.

ICBA’s principles include:

• Underwriting and property appraisal guidelines and policies should not discriminate against properties and borrowers in rural or small-town markets.
• Appraisal requirements need to be flexible to accommodate the unique nature of rural and small-town properties and should not exacerbate the current shortage of appraisers in these markets or drive higher costs for residential appraisals.
• Mortgage servicing requirements from the GSEs should be tailored to better fit the community bank cost structure and business model.
• Overly complex quality control/loan manufacturing policies and requirements add considerable costs to the process, making it harder for smaller lenders to sell directly to the GSEs.

The GSEs should not set inflexible minimum loan requirements that result in community bank lenders losing their approved seller-servicer designation if they do not sell a pre-determined number of loans to the Enterprises each year.

Background

Underwriting and Appraisal Guidelines. The GSE underwriting and appraisal guidelines, originally designed for suburban or urban communities, often make it difficult to qualify creditworthy borrowers in small-town or rural communities. In such communities, borrowers frequently have multiple sources of income such as seasonal, self-employed, or W2 wages, all of which are critical in qualifying the borrower for the loan. ICBA will continue to work with the GSEs and FHFA to develop alternatives to their processes and requirements to make it easier and more cost effective to use the GSEs.

Servicing. Community bank mortgage loan servicing is based on close ties to customers and communities. The cost to service a mortgage has doubled since the financial crisis, forcing many community banks to exit the mortgage servicing business. The GSEs must structure their servicing guidelines to avoid this outcome.