CBA Comment Letter re Ginnie Mae Eligibility Requirements for Single Family MBS Issuers

To Whom It May Concern:

The Consumer Bankers Association (CBA) is pleased to provide comments in response to your Request for Input (RFI) on Eligibility Requirements for Single Family MBS Issuers. CBA is the only national trade association focused exclusively on retail banking. Established in 1919, the association is now a leading voice in the banking industry and Washington, DC, representing members who employ nearly two million Americans, extend roughly $3 trillion in consumer loans, and provide $270 billion in small business loans.

Although CBA does not traditionally prepare comments on mortgage banking matters, this proposal by the Government National Mortgage Association (Ginnie Mae) regarding adequate risked-based capital of non-banks targets the core issue of safety and soundness of the financial system, and therefore impacts retail banking and the banking industry more generally. As such, the CBA provides this limited comment to highlight the need for consistency in capital requirements between banks and non-banks, and to support Ginnie Mae’s proposal to impose risk-based capital requirements on its non-bank single family MBS issuers. The proposed measures will move the financial system one step closer toward a safe, level playing field for all financial market participants.

Banks have long faced risked-based capital requirements that minimize operational risks in a manner similar to what Ginnie Mae hopes to accomplish by imposing requirements on non-bank, single family MBS issuers. Risk-based capital requirements provide an important buffer for banks, allowing them to absorb losses from MBSs and other sources without becoming insolvent. Banks face additional, significant regulatory requirements specifically designed to enhance banks’ ability to weather a liquidity crisis. As a result, banks can offer a variety of financial products and engage in activities, including issuing MBSs, while protecting consumers and without compromising the banks’ stability.

The global financial crisis taught us how important it is that MBS issuers hold sufficient capital reserves to avoid significant knock-on effects to the financial system. Following the global financial crisis, banks and regulators worked together to strengthen the banking system and address conditions and weaknesses in the financial system. Current capital requirements were one such method of strengthening the financial system. Liquidity requirements, safety and soundness regulation, and supervision by federal prudential regulators all work together to minimize risk to banks and mitigate systemic risk to the financial system.

Non-bank MBS issuers face far fewer of these requirements and therefore pose risks that have yet to be sufficiently addressed by regulators. Importantly, the composition of Ginnie Mae’s single family issuer base has changed dramatically since the global financial crisis to include more non-bank issuers, and therefore invites more risk. Non-bank issuers are not subject to the rigors of risk-based capital requirements, safety and soundness regulation, and supervision by federal prudential regulators that have strengthened banks and provided security for their products. If a non-bank issuer becomes insolvent due to insufficient capital and is no longer able to make payments, Ginnie Mae could be left responsible for investor payouts. As such, the greater the percentage of non-bank issuers that compromise Ginnie Mae’s single family issuer base, the greater the risk to Ginnie Mae. While risk-based capital requirements will not entirely ensure safety and soundness as to non-bank issuers, it is an important measure that will enhance the security of their single family MBSs.

CBA applauds Ginnie Mae’s acknowledgment of the need for risk-based capital requirements for non-banks, which would bring their requirements more in line with the regulatory scheme banks have long adhered to for consumers’ protection and for the safety and soundness of the financial system. Though more regulation of non-banks is required to stabilize their activities in a manner comparable to banks, Ginnie Mae’s proposed eligibility standards in the RFI are a step in the right direction and should be implemented.

We thank you for the opportunity to share our comments. Should you have further questions, please contact me at 202-552-6381 or at


Brian Fritzsche