ICBA voices opposition to Freddie Mac second mortgage product

By Housing News

The


Independent
Community
Bankers
of
America

(ICBA)
issued
a
statement
on
Monday
that
opposes
the
conditional
approval
of


Freddie
Mac
’s
plan
to
buy
closed-end
second
mortgages.

The
plan
was

approved

on
Friday
by
Freddie
Mac’s
regulator,
the


Federal
Housing
Finance
Agency

(FHFA),
which
said
that
it
reached
the
decision
to
begin
the
pilot
program
following
a
public
comment
period
and
“thoughtful
engagement
from
public
stakeholders.“

“The
limited
pilot
will
allow
FHFA
to
explore
whether
this
closed-end
second
mortgage
product
effectively
advances
Freddie
Mac’s
statutory
purposes
and
benefits
borrowers,
particularly
in
rural
and
underserved
communities,”
FHFA
Director

Sandra
L.
Thompson

said
in
the
announcement.

On
Friday,
the

Community
Home
Lenders
of
America

(CHLA)
voiced
its
support
for
the
program,
citing
the
inability
of
many
borrowers
to
refinance
and
tap
into
equity
due
to
higher

mortgage
rates
.
The

Mortgage
Bankers
Association

(MBA)
also
indicated
its
support
for
a
plan
that
is
”limited
in
size
and
duration.”
While
some
estimates
called
for
up
to

$850
billion

in
origination
opportunities
through
the
move,
the
FHFA
limited
Freddie
Mac
to
$2.5
billion
in
purchase
volume
over
an
18-month
period.

But
ICBA
President
and
CEO
Rebeca
Romero
Rainey
expressed
her
organization’s
opposition
to
the
plan,
something
that
had
been
previously
shared
in
a

letter

to
the
FHFA
last
month.

“ICBA
and
the
nation’s
community
banks
are
deeply
concerned
with
the
FHFA’s
announcement
that
Freddie
Mac

which
has
been
in
federal
conservatorship
for
more
than
15
years

will
enter
a
market
that
is
already
liquid
and
well
served
by
private-sector
community
banks,“
Romero
Rainey
said
in
a
statement.

The
ICBA
argues
that
Freddie
Mac
“has
failed
to
establish
or
justify
a
market
need
for
this
product“
as

second
mortgages

for
single-family
homes
are
already
available
through
many
community
banks
and
credit
unions.
It
also
says
that
Freddie
Mac
has
yet
to
provide
enough
details
about
loan
pricing,
property
valuation
and
risk
management,
making
the
pilot
program
inconsistent
with
the
agency’s
“core
housing
mission.“

The
ICBA
believes
that
the
program
“could
exacerbate

housing
supply
challenges

for
new
homebuyers
during
an
already-challenging
interest
rate
environment.“
The
group
also
argues
that
efforts
to
remove
Freddie
Mac
and
fellow
government-sponsored
enterprise

Fannie
Mae

from
their

conservatorship
status

will
be
further
delayed
by
the
product
launch
as
it
will
be
“diverting
resources
and
requiring
additional
credit
risk
mitigation
that
would
keep
it
from
retaining
appropriate
levels
of
capital.“

“Amid
a
15-year
conservatorship
that
has
subjected
Fannie
Mae
and
Freddie
Mac
to
political
influence
and
compromised
their
founding
purpose
of
expanding
the
secondary
mortgage
market
to
provide
liquidity
for
home
purchases
and
refinances,
the
FHFA
should
avoid
further
disrupting
the
private
sector,
reject
a perpetual
conservatorship, and
return
the
enterprises
to
private
ownership
and
control,
as
required
by
the
Housing
and
Economic
Recovery
Act,”
Romero
Rainey
said.

Freddie
Mac
first

announced
in
April

that
it
was
planning
to
purchase
certain
types
of
closed-end
second
mortgages
in
an
effort
to
help
homeowners
tap
into
home
equity
without
the
need
to
refinance
their
first
mortgage
at
a
higher
rate.

The
pilot
program
approved
last
week
will
permit
Freddie
to
purchase
$2.5
billion
in
loans
during
an
18-month
period.
Only
loans
for
primary
residences
are
eligible
and
the
first
mortgage
must
have
been
originated
at
least
24
months
prior.
The
maximum
loan
amount
is
$78,277
and
the
combined
loan-to-value
ratio
on
all
properties
cannot
exceed
80%.

The
FHFA
noted
that
any
efforts
to
extend
the
timeline
for
the
pilot
program
or
increase
the
purchase
limits
would
have
to
go
through
a
separate
approval
process,
including
another
public
comment
period.
Thompson
said
that
the
$2.5
billion
cap
was
a
result
of
the
agency
being
“responsive
to
concerns
from
several
commenters
regarding
the
potential
macroeconomic
and
mortgage
market
impacts
of
a
broader
offering.“

“This
is
intended
to
mitigate
any
concerns
about
potential
inflationary
impacts,
extending
the
mortgage
‘lock-in’
effect,
or
the
‘crowding
out’
of
private
capital,“
Thompson
said.

 

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