Banker argues for GSE reform

More than nine years after Fannie Mae and Freddie Mac were first brought into the conservatorship of the Federal Housing Finance Agency, they remain there. Both the ICBA and the ABA addressed the House Financial Services Committee’s Subcommittee on Housing and Insurance about the reform of the two government-sponsored enterprises Wednesday.

Sam Vallandingham, president and CEO of The First State Bank, Barboursville, W. Va., spoke on the ICBA’s behalf, arguing the GSEs are needed to promote beneficial competition in the mortgage lending industry while avoiding dangerous concentration.

“The stakes involved in getting housing-finance market policies right have never been higher,” Vallandingham said. “ICBA’s approach to GSE reform is simple: Use what’s in place today and is working and focus reform on aspects of the current system that are not working or that put taxpayers at risk.”

A common thread between Vallandingham’s testimony and the ABA’s — presented by Brenda Hughes, senior vice president and director of mortgage and retail lending at First Federal Savings, Twin Falls, Idaho — was the need for an explicit, fully-priced government guarantee of all mortgage backed securities.

“Reform need not be radical or extreme, but comprehensive,” Hughes said. “Legislation need not create an entirely new secondary market structure. In fact, guided by these key principles, we believe that relatively tailored legislation that takes a surgical approach to making necessary alterations to the current system is desirable and can achieve needed comprehensive reform.”

Vallandingham’s entire testimony is available here and Hughes’ can be read here.

“Congress should not defer action any longer,” Hughes said. “Nine years of conservatorship is more than enough.”