Community banks and credit unions may seem like a blip on the radar screen when it comes to mortgage lending activity, but they’re not fading away without a good fight.

In fact, representatives from the industry appeared before the Senate Subcommittee on Banking, Housing and Urban Affairs to discuss the need for tomorrow’s mortgage finance space to consider the requirements of community banks and smaller credit unions.

One of the speakers, Sandra Thompson, deputy director of housing mission and goals for the FHFA, noted smaller banks in particular need access to a strong secondary mortgage market – a consideration that needs to be made as lawmakers fight to find private sector solutions to the housing market.

“During conservatorship, FHFA has taken meaningful steps to ensure community-based lenders have equal access to the secondary market,” Thompson said in prepared testimony. “It is vital to ensure that community-based institutions have the ability to fully participate in the housing finance system of the future.”

Without the right secondary market structure in place, rural areas that depend on community banks could struggle to access the financing they need, Thompson suggested.

“Standard documentation that aggregators or large lenders require from mortgage originators before accepting loans for securitization may be more difficult to produce in smaller and rural communities,” she explained.

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