Here’s the U.S. Treasury’s advice on how to level the mortgage playing field


Right as Washington is about to switch over to a Republican leader after eight years with Pres. Obama at the helm of the nation, the U.S. Treasury gathered its final parting thoughts on reforming the housing finance system, publishing a three-part series on the advice it would give for creating the future system.

The first blog discussed the need for housing finance reform to provide access to affordable housing for all Americans, while the second focused on the need to preserve access to mortgage credit through the U.S. economy’s ups and downs.

Now, to cap it off, Jane Dokko, deputy assistant secretary for Financial Economics, and Sam Valverde, a counselor in the Office of Domestic Finance, published their third and final blog, focusing on how regulatory oversight of the secondary market can guide a reformed system to serve consumers and financial institutions of all sizes.

Here’s only a preview of the beginning of the blog. Check out the in-depth explanation here, along with links to previous blogs.

American families also benefit when lenders of all sizes have equal access to the benefits of government-guaranteed MBS. In the past, larger lenders enjoyed certain price concessions from the GSEs that were not available to smaller lenders. The regulatory framework for the secondary mortgage market should support fair competition across all lenders, regardless of size or type.

Promoting a level playing field for lenders large and small has a number of benefits for American families. First, it fosters competition among mortgage lenders that, in turn, benefits consumers through greater innovation and lower mortgage rates offered to borrowers.

Second, it provides competitive access to funds that smaller institutions use in providing mortgages, which has both local and economy-wide benefits. From rural to urban settings, community banks, credit unions, and local lenders are in an advantageous position to assess and address the credit needs of their customer base.

Moreover, a diverse market presence from lenders of all sizes can lead to more effective risk assessment and better outcomes for borrowers and investors alike. Strengthening access for small lenders also helps secondary market institutions support their obligation to serve a broad range of markets and geographic areas.

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