Joint Trades Letter on Improving Housing Affordability through Bank Capital Modernization

Dear Madam and Sirs:

On behalf of the undersigned associations, we write to express our support for the continued work to reexamine and repropose a revised Basel III Endgame rule. The renewed effort provides an opportunity to improve mortgage market stability and housing affordability, while encouraging greater bank participation in the mortgage market.

Our members support regulatory capital requirements that are appropriately calibrated to the risk posed. Adequate capital reduces the likelihood of bank failures that threaten broader financial stability, which can prove costly for households, financial institutions, and taxpayers. However, excessive capital requirements that are misaligned with empirically derived risk assessments can negatively affect the cost of and access to credit.

We appreciate that these broad policy concerns have been reflected in public comments from your agencies, most recently and clearly in Vice Chair Bowman’s remarks this week about the need to address the regulatory capital barriers that continue to discourage U.S. banks from participating more robustly in the single-family mortgage market. That commentary is also important in the context of current efforts to address housing affordability challenges, as consumers will benefit from greater competition and deeper mortgage market liquidity. As we prepare to review and comment on the forthcoming proposed rule, the undersigned associations offer our aligned perspectives on the capital rule changes that will best support our housing finance markets and urge the agencies to move expeditiously to notice and comment.

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