Trade Group Releases White Paper on Future Role of GSEs

The ""Community Mortgage Lenders of America"":http://thecmla.com/ (CMLA) released a ""white paper"":http://thecmla.com/pub/uploads/recent_efforts/CMLA_Task_Force_Paper_05302012.pdf outlining its policy suggestions for the future of ""Fannie Mae"":http://www.fanniemae.com/portal/index.html and ""Freddie Mac"":http://www.freddiemac.com/.

[IMAGE]

Shrinking the GSEs role in the secondary market to 30-35 percent and preventing them from securitizing or investing into risky mortgages were among the ideas the trade group endorses.

Still, the CMLA said it wants to see the GSEs remain intact due to uncertainty in the markets and to ensure further destabilization does not occur. Also, the trade group stated its support for the GSEs to maintain practices related to the standardization of origination documentation, servicing practices, securitization terms, and foreclosure-prevention strategies.

""Our plan is forward-looking and will result in distinct changes in the secondary market. However, we call on Washington to move expeditiously and to avoid drastic, politically-driven changes that will harm small lenders and the small communities in which they serve,"" said Mark McDougald, Chairman of the CMLA.

As a trade group founded out of concern over federal policies that threaten the role of community lending, the CMLA also stressed support for the GSEs to refrain from market concentration and encourage participation among a variety of lenders.

While rescuing the GSEs has already cost taxpayers about $180 billion, according to FHFA estimates, the CMLA also stated it believes full taxpayer repayment should occur and is possible.

In the paper, the CMLA said income derived from the guarantee fee should be put back into the housing industry. The CMLA expressed opposition of the use of GSE guarantee fees to fund a two-month extension to reduce payroll taxes, and said such fees should not be used for any unrelated purposes.

The CMLA also made clear that it does not oppose price adjustments for guarantee fees and even recommends changes if it is used to price credit risk accurately and repay taxpayers.

Among other proposals, the white paper suggested a governing board to regulate post-conservatorship executive compensation to prevent excessive risk-taking by executives.