As the mortgage market begins to stabilize, many small lenders are diversifying their secondary mortgage market options, prompting Congress to propose equal opportunities for smaller institutions to enter the industry.

As regulators consider both transitional and end state housing reforms, all panelists during a Senate Banking Committee hearing on Tuesday argued that the future market needs to provide direct access for small lenders who can take on requisite responsibilities.

In response to market participants, Congress proposes an expanded system that resembles the Ginnie Mae model in which lenders are issuers — leaving them responsible for obtaining private credit enhancement before delivering pools to the securitization platform for the government guaranty.

Additionally, the proposed bill expands the role forFederal Home Loan Banks.

While all panelists applauded both sides of the aisle for creating a mutual organization, some minor hiccups remain the way of a smooth transition to a new normalcy of mortgage finance.

“This approach may work for some lenders, but may be too operationally difficult for many small lenders,” explained Mortgage Bankers Association chairman Bill Cosgrove.