Policymakers could improve independent mortgage banks’ financial stability by giving these companies improved access to liquidity, according to the Mortgage Bankers Association.
Among other things, policymakers should “ensure the mortgage servicing compensation regimes of the GSEs and Ginnie Mae present and support a deep and liquid market for mortgage servicing rights for servicers of all sizes and business models,” the group said in a recent report.
The MBA also continues to back efforts to “grant IMBs eligibility for the FHLB system,” as a way to “further strengthen the liquidity positions of IMBs.”
Some banks have opposed the move, citing concern that it would increase the level of risk the Federal Home Loan Bank System is exposed to.
But the “risk import of IMBs’ larger role in today’s mortgage market is overstated,” according to the MBA.
While nonbanks currently do dominate the mortgage market, their share is in line with the past cycles; and while the average credit quality of their loans is lower than banks’, “there is little evidence of a return to the excessively layered risks that characterized the precrisis period,” the MBA said.
The association also is backing some policy changes that “make the mortgage market more attractive to banking institutions” as well as nonbanks, because this “also helps IMBs by supporting a deep liquid market for MSRs.”
Bank policy changes the group is endorsing include “reducing the punitive capital treatment of MSRs under U.S. bank capital rules” and “fixing the FHA false claims act enforcement that has driven many banks from the FHA program.”