National Association of Federal Credit Unions | We Rely on GSEs

Aug. 16, 2013 – The August issue of NAFCU’s Economic & CU Monitor shows the government-sponsored enterprises Fannie Mae and Freddie Mac play an outsized role in the credit union industry’s mortgage products – a finding that underlines the importance of credit unions’ continued access to the secondary mortgage market.

In NAFCU’s latest Monitor survey, NAFCU members were asked about how GSEs figure in their ability to deliver mortgage products to their members and how they serve as a source of liquidity. Among notable survey responses, a majority of respondents – 71.4 percent – said their board policies restrict the percentage of real estate loans held on the balance sheet; the median ceiling is 30 percent of assets. Data from the Federal Financial Institutions Examination Council shows that 60 percent of real estate loans from credit unions go to Fannie or Freddie, compared with 44 percent among all financial institutions.

“GSEs are a critical part of the business models of many credit unions, and their presence helps to limit the exposure of a number of risks,” according to the Monitor. “Due to regulatory restrictions that hamstring the ability for credit unions to hedge against interest rate risk, their access to the secondary market has large implications for the safety and soundness of the industry.”

Most respondents – 87.1 percent – cited interest rate risk as their main motivation for doing business with GSEs. Also, the Monitor survey showed that the elimination of GSEs would significantly affect about half of respondents’ ability to provide mortgage loans and that 7.2 percent of respondents would be either somewhat or highly likely to end mortgage programs altogether.

Related Links: 
NAFCU Economic & CU Monitor