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60 | TH E M R EP O RT SECONDARY MARKET THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Why All Guarantors Must Serve a National Market The Senate heard from industry representatives on the future of the government's role in housing finance. T he Senate Banking, Housing, and Urban Affairs Committee held the second part of its hearing on Committee Chair - man Mike Crapo's Housing Finance Reform outline. Tes- timonies by mortgage banking and housing experts provided further insights into the best way forward to strengthen and implement this outline. "Today, the Committee continues the conversation about the state of our housing finance system, and how we can set it on a permanent, sustainable course that protects taxpayers and fosters greater competition," Sen. Mike Crapo (R-Idaho) said in his opening statement. Giving his insights on the outline, Michael Bright, President and CEO, The Structured Finance Industry Group (SFIG) and the former EVP and COO of Ginnie Mae, said the latest outline touched upon many of the principles that were important to SFIG including: creating a clear role for private capital, establishing a clear and explicitly defined role for the government, the preservation of a liquid TBA market, the preservation of a 30-year fixed-rate mortgage, and making use of already-existing securitization infrastructure. "As the former head of Ginnie Mae, I can attest that global investors will allocate much more capital and at a much lower cost to the U.S. mortgage market if Congress puts a seal of approval on a new end state," Bright said. "One major lesson I learned at Ginnie is that, when speaking to a non-U.S. investor, the first thing they will ask is, 'Is the law clear?' Any lack of clarity on the government's role versus private capital's role adds ambiguity, and ambiguity adds to costs. These costs are ultimately borne by the homeowner." He said that while SFIG mem - bership supported and wanted to help provide broader accessibility to mortgage credit throughout the country, "a role for Congress here is critical." Bright said while considering housing finance reform, there were three issues with the role of private capital that Congress must address. The first was to address how private capital could fill in once the end of the "QM patch" ended in 2021. "Private capital can absolutely help to fill in once this transpires, but some policy changes would be very helpful to ensure the continued availability of mortgage credit. Most importantly, there needs to be a process of determin - ing what qualifies for QM that is independent of whether or not the GSEs' underwriting systems accept the loan," he said. The second issue was the better alignment of regulatory capital requirements between the GSEs and banks. Bright explained the third issue, saying, "As policy-makers look to reduce total reliance on Fannie, Freddie, and FHA while ensuring access to homeownership, a proper mechanism for allowing REITs to access the Home Loan Bank system makes sense." Giving mortgage bankers' views on the outline, Robert D. Broeksmit, President and CEO, Mortgage Bankers Association (MBA) said, "Reforms must move forward without delay." Commending Crapo and his team for releasing the outline that was being discussed, he said the hous - ing finance system required struc- tural reforms "that will ensure a stable, liquid secondary market to support a vibrant, diverse primary market and comprehensive legisla - tion is essential for such reforms." In particular, he said the MBA supported the outline's concept of a multi-guarantor market featuring well-regulated, privately-owned institutions aggregating loans in a fair, transparent manner and issu - ing securities with a full-faith-and- credit federal guaranty that stands behind substantial private capital. "This concept is a strong foun - dation upon which to develop legislation," Broeksmit said. "Based on extensive feedback from our members, MBA believes that a system that is structured around guarantors minimizes transition risk and ensures equal access to the secondary market for diverse set of lenders," he said. "Market access by lenders of all types and sizes provides tangible benefits for homebuyers through broader competition and availability of credit in all markets at all times." Speaking from the mortgage insurer's point of view, Lindsey Johnson, President, U.S. Mortgage Insurers (USMI) said the outline represented "an important marker in the discussion on housing finance reform because it ac - knowledges the need to limit the GSEs' market power, better shield

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