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WASHINGTON, D.C. — America’s Community Bankers said today it supports the continuing role of Fannie Mae and Freddie Mac as secondary mortgage market companies, which should not invade the primary market where lenders, like ACB’s members, deal directly with homebuyers.

ACB’s policy position on the housing government-sponsored agencies was presented to the House Capital Markets, Securities and Government-Sponsored Enterprises Subcommittee at a hearing on a comprehensive reform bill introduced by Chairman Richard Baker (R-La.).

"The evolution of Fannie Mae and Freddie Mac is ACB’s primary concern," said ACB First Vice Chairman David A. Bochnowski in urging the federal government to "exercise vigilant oversight to ensure that the subtle balance between these GSEs and private market lenders is not upset." Bochnowski is also chairman, president and CEO, Peoples Bank, Munster, Ind.

Bochnowski acknowledged the important role Fannie, Freddie and the Federal Home Loan Bank System play in the nation’s system of housing finance. "The unique synergy between primary mortgage lenders and the GSEs has succeeded in extending the benefits of homeownership to a record percentage and number of Americans," he said.

Bochnowski recommended that any legislation more clearly define the mission of Fannie and Freddie to ensure that the companies do not engage in nonmission-related products and investments. The activities of Fannie and Freddie "should not subsume or discourage competition between current private-sector participants," he added.

"ACB does not believe that expansion of Fannie Mae and Freddie Mac into the home equity line of credit market is consistent with their basic mission to promote homeownership," Bochnowski said. "Legislation is necessary to limit such mission creep, and the regulators must assume a more active role in mission oversight," he said.

Bochnowski said ACB supports provisions of Baker’s bill that would combine the mission and safety and soundness regulators of Fannie and Freddie into a single regulator with strong supervisory authority and require the companies to obtain prior approval of new products — "an extremely important aspect of the legislation."

Bochnowski said a better program review process might have prevented some of ACB’s concerns over Freddie Mac’s joint venture with HomeAdvisor Technologies, Inc., a company controlled by Microsoft, to provide its automated underwriting system for use in an Internet mortgage loan program.

Bochnowski drew a distinction between Fannie and Freddie as publicly traded companies and the Federal Home Loan Bank System as a cooperative system of member institutions. He opposed consolidating the oversight of the FHLBank System into a single regulator for Fannie and Freddie because of the different nature of the capital base, ownership structure and motivation for new programs. For example, he said risk-based capital standards must be based on the GSEs’ different missions or business approaches.

On other provisions of the bill, Bochnowski said ACB does not support elimination of the GSE’s lines of credit with the Treasury and opposes repeal of the FHLBanks’ super lien authority because both actions could be expected to raise residential mortgage costs. He supported a sense of Congress provision that would call on the banking regulators to equalize the risk-based capital weighting of Fannie-Freddie mortgage backed securities and those of private issuers.

Bochnowski sought the subcommittee’s help in extending the statutory deadline for the Federal Housing Finance Board to finalize a capital rule for the FHLBank System for up to one year. He also sought support in opposing a moratorium on removal of the dollar cap and pilot status on the FHLBanks’ Mortgage Partnership programs.

A copy of the testimony is linked.