Future of Fannie Mae and Freddie Mac Creates Uncertainty for Small Banks, Credit Unions

While continued discussion about the future of Fannie Mae and Freddie Mac has created concerns for community banks and credit unions, a final solution is still uncertain.

The government has previously said that it is working to find a way to wind down and eventually replace Fannie Mae and Freddie Mac. While credit unions and community banks tend to hold onto many of the mortgages they make instead of selling them off to the two mortgage giants, eliminating the two without providing a replacement would create higher costs for consumers.

"We want some sort of mechanism or entities that would provide equal access to community banks," Ann Grochala, vice president of lending and accounting policy at the Independent Community Bankers of America, told The Washington Post. "There's a variety of possibilities out there ... but we haven’t seen the solution yet."

Grochala also told the paper that the group is considering banking strategies that would allow small banks to pool their loans collectively before securitizing them, much like the system currently used by the Federal Home Loan Banks.

Any change that increased costs for consumers would impact a significant slice of the residential mortgage market. Credit unions alone have accounted for nearly 6 percent of all first mortgages in recent years, according to the Credit Union National Association.

Recent tax discussions have also further clouded the picture. Some lawmakers have proposed adding additional fees for mortgages backed by the two mortgage giants, and using that money to pay for an extension to the payroll tax cut.

Others have said such a move would significantly complicate the process of eventually eliminating the two companies.