NAFCU Letter to FHFA on GSEs Buy-Back Policies and Requirements

January 14, 2013

Mr. Edward J. DeMarco
Acting Director
Federal Housing Finance Agency
400 7th Street, SW
Washington, D.C. 20024

RE:    GSEs Buy-Back Policies and Requirements

Dear Mr. DeMarco:

On behalf of the National Association of Federal Credit Unions (NAFCU), the only trade association that exclusively represents federal credit unions (FCUs), I am writing to you regarding an issue that is gaining momentum in the secondary housing market – mortgage loan buy-back provisions.

First and foremost, NAFCU would like to thank the FHFA for its continued work to help stabilize the nation’s mortgage market.  Since the beginning of the housing market crisis, NAFCU has been in regular contact with the FHFA to express credit unions’ concerns and interests.

A major issue about which we have been discussing with you is access for credit unions and other federally-insured small lenders to the secondary housing market.  We have continually expressed our view that policy changes to the secondary housing market must take into account equitable access for credit unions.  While there are many factors that directly impact equitable access to the secondary market for credit unions, NAFCU is concerned that Fannie Mae and Freddie Mac (GSEs) may, willingly or as a result of political pressure, impact such access by requiring credit unions and other small lenders to agree to “buy-back” provisions as part of a larger policy to ensure that they purchase or insure only mortgages that meet particular criteria.

Should the GSEs make such demands, NAFCU is concerned that there will be at least two highly undesirable results.  First, such policies will reinforce a market that will potentially be predominantly made up of one or a few products.  For example, if the GSEs adopt policies requiring buy-back provisions for those loans that are not “qualified mortgages,” i.e., such mortgage loans that do not meet the definition of “qualified mortgages” that the Consumer Financial Protection Bureau established in its “ability-to-repay” rule, the market can only be expected to further contract to absorb very few mortgages outside the “qualified mortgages” realm.  Second, any buy-back requirement will disproportionately affect credit unions and other small lenders.  Specifically, credit unions and other smaller lenders will be more affected because they do not have the volume of loans or the requisite capital.  This would be the case in a scenario where the GSEs adopt a policy requiring a buy-back provision for mortgages that are not “qualified mortgages” as well as a scenario where the GSEs adopt a more general requirement to agree to buy-back provisions.

For these reasons, we respectfully request that the FHFA, as both the conservator of and in its oversight and regulatory authority over the GSEs, carefully considers the impact of buy-back policies on credit unions and other small lenders.  The consequence of such policies, we fear, would create inequity as regards access to the GSEs between the largest mortgage lenders, who are far more able and equipped to handle such requirement, and credit unions and other smaller lenders.

NAFCU appreciates your attention to this matter.  Should you have any questions or would like to discuss these issues further, please contact me at or by telephone at (703) 842-2803 or Tessema Tefferi, NAFCU’s Senior Regulatory Affairs Counsel, at or by telephone at (703) 842-2268.


B. Dan Berger
Executive Vice President of Government Affairs


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