In a recent letter to Federal Housing Finance Agency Acting Director Edward DeMarco, the National Association of Federal Credit Unions expressed concern about the FHFA limitations on Fannie Mae and Freddie Mac loan purchases to “qualified mortgages.”
The FHFA announced on Monday it had instructed Fannie and Freddie to limit their acquisitions to loans that meet the requirements for a qualified mortgage, including mortgages that meet the special qualified mortgage definition or are exempt from Dodd-Frank’s ability-to-repay requirements.
Beginning in January, Fannie and Freddie will no longer purchase loans that are subject to the ability-to-repay rule if the loan has a term of more than 30 years, is not fully amortizing or includes fees in excess of three percent of the total loan amount.
Carrie Hunt, NAFCU’s general counsel and vice president of regulatory affairs, said that if the FHFA prevents the mortgage giants from buying non-qualified mortgages, consumers in underserved and rural communities will be negatively impacted.
“Borrowers in such communities may not have the necessary debt-to-income ratios or other characteristics to receive qualified mortgages,” Hunt said. “Lenders, already facing the legal and enforcement risks of the CFPB’s regulations, will be left with severely reduced incentives to extend non-qualified mortgages if the FHFA bars Fannie and Freddie from purchasing them. The end result is that a number of otherwise financially healthy borrowers, who do not meet the stringent qualified mortgage standards for one reason or another, may be denied a mortgage, and the housing market and the secondary housing market will contract, further exasperating the issues facing all involved parties.”