Rep. Scott Garrett, R-N.J., is working on a bill that would encourage the re-emergence of a private-label securities (PLS) market by exempting certain loan pools from risk retention and Securities and Exchange Commission (SEC) registration.

The bill would direct the Federal Housing Finance Agency (FHFA) to establish underwriting standards for” traditional loans with various levels of risk,” Rep. told a National Association of Federal Credit Unions (NAFCU) conference Friday morning.

The FHFA would also establish securitization standards as well as servicing and pooling agreements for PLS.

The chairman of the House GSE and Capital Markets Subcommittee said an exemption from SEC registration is “important” because it would allow PLS to be priced in the TBA market.

Garrett said his bill also would provide small banks and credit unions direct access to a private secondary market. “Credit unions could establish a co-op to sell mortgages directly into the market,” he said.

Ginnie Mae president Ted Tozer also encouraged NAFCU members to create mortgage co-ops so they can pool and securitize FHA and other government-backed loans.

If one credit union acts as a master servicer for the co-op, the other credit union members could pool their loans together and securitize them through Ginnie Mae.

Tozer stressed that such co-ops would allow individual credit unions to keep the servicing so they don’t have to sell it to the large aggregators.

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