The Federal Housing Finance Agency (FHFA) can take several steps to address the racial wealth gap and the racial homeownership gap, CUNA Senior Director of Advocacy and Counsel Elizabeth LaBerge told an FHFA listening session Tuesday. The agency conducted the session on closing the gap to sustainable homeownership.

“CUNA supports the FHFA’s recent effort to assess and modernize the current GSEs’ appraisal policies, practices and processes,” LaBerge said. “We would strongly encourage the FHFA to carefully examine the education and training requirements for appraisers to ensure they understand existing obligations under the Fair Housing Act, but also receive training on implicit and unconscious bias to ensure appraisers have the tools needed to consciously confront their own bias so that it does not appear in an appraisal report. Further, CUNA strongly supports efforts to improve the number and diversity of appraisers.”

She also encouraged FHFA to consider a pilot program to purchase small mortgages underwritten with alternative data in lieu of traditional credit scores, noting that credit unions’ unique structure and relationship with members allow them to be more flexible when meeting member needs.

“Credit union underwriters use tools beyond credit reports to understand a consumer’s financial situation, such as reviewing an account to establish consistent income or a history of timely rent and utility payments…An FHFA pilot program could work with lenders to understand and evaluate these alternative data underwriting practices to help establish an appropriate risk assessment for these types of programs, and establish additional routes to selling these kinds of loans into the secondary market,” LaBerge said. “Creating liquidity for these small mortgages may take additional effort but are critical to closing the homeownership gap.”

She also reinforced CUNA’s previous comments regarding the use of the 80% of area median income threshold for its home affordability products. CUNA believes this income limitation often fails to accurately capture the economic realities of some geographic areas.