this American Independent Community Banker (ICBA) issued a statement on Monday opposing conditional approval Freddie MacPlan to purchase a closed second mortgage.
The plan was approved by Freddie Mac regulators on Friday federal housing finance agency (FHFA) said it decided to begin the pilot program after a public comment period and “thoughtful engagement with public stakeholders.”
“The limited pilot will allow FHFA to explore whether this closed-end second mortgage product can effectively further Freddie Mac’s statutory purposes and benefit borrowers, particularly in rural and rural areas,” FHFA Director Sandra L. Thompson said in the announcement. Underserved communities.
Friday, American Community Home Lender (CHLA) expressed support for the plan, citing rising mortgage rates that prevent many borrowers from refinancing and tapping equity. this Mortgage Bankers Association (MBA) also expressed support for a plan that would be “limited in size and duration.” The FHFA limited Freddie Mac’s purchases to $2.5 billion over 18 months, despite some estimates that the move would create as much as $850 billion in startup opportunities.
But ICBA President and CEO Rebeca Romero Rainey expressed the organization’s opposition to the plan, which was previously expressed in a letter to FHFA last month.
“The Federal Housing Finance Agency (FHFA) announced that Freddie Mac will enter a market that is already liquid and well-served by private community banks and that has been federally regulated for more than 15 years,” Romero said. and national community banks are deeply concerned.
ICBA argued that Freddie Mac “failed to establish or demonstrate market need for the product” because many community banks and credit unions already offer second mortgages on single-family homes. It also said Freddie Mac had not provided enough details about loan pricing, property valuations and risk management to make the pilot program inconsistent with the agency’s “core housing mission.”
ICBA believes the program “could exacerbate housing supply challenges for new homebuyers in an already challenging interest rate environment.” The group also believes unwinding efforts by Freddie Mac and other government-sponsored enterprises Fannie Mae The launch of the product will further delay the removal of its regulatory status as it will “divert resources and require additional credit risk mitigation measures, preventing it from retaining appropriate levels of capital.”
“Fifteen years of regulation have exposed Fannie Mae and Freddie Mac to political influence and undermined their founding purpose of expanding the secondary mortgage market to provide liquidity for home purchases and refinancing. FHFA should avoid further disrupting the private sector,” Romero Reni said: “Permanent conservatorship and return of the business to private ownership and control, as required by the Housing and Economic Recovery Act.” “
Freddie Mac first announced in April that it planned to purchase certain types of closed second mortgages to help homeowners tap into their home equity without having to refinance their first mortgage at a higher interest rate.
The pilot program approved last week will allow Freddie Mac to purchase $2.5 billion in loans over 18 months. Only loans on primary residences are eligible, and the first mortgage must have been originated at least 24 months ago. The maximum loan amount is $78,277, and the loan-to-value ratio on all properties cannot exceed 80%.
FHFA noted that any effort to extend the pilot program or increase purchase limits would have to go through a separate approval process, including another public comment period. Thompson said the $2.5 billion cap was the result of the agency’s “response to concerns expressed by some commentators about the potential impact of a broader issuance on the macroeconomic and mortgage markets.”
“The move is intended to allay concerns about potential inflationary effects, a wider mortgage ‘lock-in’ effect or a ‘crowding out’ of private capital,” Thompson said.
