The Mortgage Bankers Association (MBA) has come out in opposition to the Advance Notice of Proposed Rulemaking (ANPR) issued by the Federal Deposit Insurance Corp. (FDIC), which is considering strategies on dealing with the securities of failed institutions.

In a seven-page letter to Robert E. Feldman, executive secretary of the FDIC, the MBA warns that the ANPR will create more problems than solutions, and may also delay the revival of the private-label market.

‘MBA appreciates the FDIC's objective to increase investor confidence in a manner that balances its safety and soundness considerations with the market's need for liquidity,’ writes John Courson, president and CEO of the MPA. ‘However, MBA is concerned that some key features of the ANPR, if enacted, would impose additional transaction costs, generate regulatory uncertainty and lead to other negative consequences that could pose significant financial and operational obstacles to any securitization framework, thereby restricting an efficient and vital source of liquidity. MBA, therefore, requests the FDIC withdraw the ANPR and collaborate with other federal regulatory agencies to evaluate the adequacy of existing supervisory requirements governing the securitization markets.’

Courson adds that the ANPR will be particularly detrimental to the securitization of multifamily housing projects and commercial properties and that it will exacerbate the residential market for nonconforming loans.

‘Many households cannot qualify for single-family conventional loans eligible for delivery into securities issued by Fannie Mae or Freddie Mac or for Federal Housing Administration or Veterans Affairs loans eligible for mortgage-backed securities (MBS) guaranteed by Ginnie Mae,’ he continues. ‘These households include – but are not limited to – foreign national residents and households requiring loan amounts higher than the Fannie Mae, Freddie Mac or Ginnie Mae maximum levels. In the past, these borrowers were served by financial institutions with expertise in securitizing their loans into private-label MBS.’

Courson also warns that the ANPR would discourage insured depository institutions to securitize loans, thus putting the MBS onus solely on institutions outside of the FDIC's regulatory oversight.

‘While the FDIC's stated motivation for issuing the ANPR is to minimize the costs of winding down a failed bank, MBA believes a likely unintended adverse consequence is reduced competitiveness in the securitization markets and higher consumer borrowing costs as fewer and fewer financial institutions engage in securitization transactions,’ says Courson.

SOURCE: Mortgage Bankers Association


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