Maximizing loan purchases is best for GSE oversight

March 18, 2016

WASHINGTON (3/18/16)--The Credit Union National Association (CUNA) generally believes enabling and maximizing the purchasing and guaranteeing of private market loans is the best approach for the Federal Housing Finance Agency’s (FHFA) oversight of Fannie Mae and Freddie Mac. Otherwise known as the Enterprises, Fannie and Freddie have a statutory “duty to serve” very low-, low- and moderate-income families, which is the subject of an FHFA proposed rule.

“A vibrant and active secondary market is the best way to encourage our member credit unions to be involved in the construction and rehabilitation of multifamily rental properties,” reads CUNA’s comment letter on the proposal. “While we acknowledge the Enterprises are subject to statutory requirements to serve underserved markets, these objectives are not inconsistent with allowing private participation.”

Specifically, the FHFA’s proposal would provide duty to serve credit for eligible Fannie and Freddie activities that facilitate: a secondary market for mortgages related to manufactured homes titled as real property; blanket loans for certain categories of manufactured housing communities; preserving the affordability of housing for renters and homebuyers; and housing in rural markets.

The proposal also establishes a method for evaluating and rating the Enterprises’ compliance with the duty to serve each underserved market.

Concerning the establishment of the secondary for manufactured housing, CUNA asked the FHFA to encourage the Enterprises to treat loans for the purchase of manufactured housing as residential mortgage transactions.

“We note that the Truth in Lending Act’s Regulation Z and other consumer regulations govern these loans and provide meaningful protections for the consumer,” CUNA wrote. “Again, the intent is to make it easier for private lenders to participate in this market.”

CUNA also encouraged the FHFA to direct Fannie and Freddie’s work with the Consumer Financial Protection Bureau (CFPB) to resolve the “dual escrow” situation where two loans (one on the underlying property and one on the manufactured home) may have dual escrow accounts for the payment of real estate taxes.

“Clarification of this issue by the CFPB would further facilitate the provision of manufactured housing loans by lenders,” CUNA wrote.

CUNA also expressed concerns that the roles of Fannie and Freddie are likely to be revised in the near future, which provides “a bit of a quandary,” CUNA noted, to articulate the best public policy that will lend itself to a robust and stable secondary market that is supportive of lenders and assists in meeting the Enterprises’ statutory directives.