The Community Home Lenders Association sent a letter to Treasury Secretary Jack Lew on Thursday, asking the Treasury Department to take action to set aside a portion of Fannie Mae and Freddie Mac’s profits currently swept by the Treasury Department into a reserve account, to ensure that small lenders will have continued access through a Cash Window under future housing finance reform.   

CHLA consists of community-based mortgage lenders nationwide and is the only national association that exclusively represents non-bank lenders.

The disposition of Fannie and Freddie profits is the source of ongoing controversy between those who back GSE recapitalization and those who support the Treasury’s “third amendment sweep” of profits.

“The Community Home Lenders Association writes to recommend that a portion of the funds contributed by Fannie Mae and Freddie Mac under the FHFA/Treasury Preferred Stock Purchase Agreement be set aside into a Capitalization Reserve Account, for later use as needed for capitalization of a Cash Window for small mortgage lenders under housing finance reform,” the letter says.

The full text of the letter can be read here.

CHLA’s proposal differs from other proposals of late that call for the GSEs to retain some of their profits, instead of having them swept by Treasury.  

First CHLA’s main focus is on reserving funds for eventual capitalization of whatever entity or entities will provide such a small lender Cash Window under a reformed housing system.  

Secondly, CHLA’s proposal reserves these funds at Treasury, instead of with the GSEs. 

The CHLA letter notes that the bi-partisan GSE reform bill (S. 1217) that passed the Senate Banking Committee last year emphasized the importance of a small lender cash window, and specifically required that a portion of the GSEs’ profits be used for the capitalization of a cash window.  

CHLA’s letter notes that there are different options for achieving a Cash Window, but notes that, “Regardless of the ultimate resolution, we grow increasingly concerned that one of the most obvious sources of capitalization for such a Cash Window - payments under the PSPA - continue without any action to set aside a portion of these payments in reserve for this purpose.”