NAFCU Letter to FHFA on Limiting Fannie Mae and Freddie Mac Loan Purchases to “Qualified Mortgages”

May 6, 2013

Mr. Edward J. DeMarco

Acting Director
Federal Housing Finance Agency

400 7th Street, SW

Washington, D.C. 20024

RE:      Announcement from FHFA Limiting Fannie Mae and Freddie Mac Loan Purchases to “Qualified Mortgages”

Dear Director DeMarco:

On behalf of the National Association of Federal Credit Unions (NAFCU), the only trade association that exclusively represents federal credit unions, I am writing to you regarding an issue that is of great concern in the current housing market: qualified mortgages.

First and foremost, NAFCU would like to thank you for meeting with us last week to discuss housing reform issues and their impact on credit unions.  NAFCU believes it is a top priority to evaluate any changes to the secondary market for credit unions and appreciates FHFA’s willingness to engage in a constructive dialogue.

Today, the FHFA announced that it is directing Fannie Mae and Freddie Mac to limit their future mortgage acquisitions to loans that meet the requirements for a qualified mortgage, including those that meet the special or temporary qualified mortgage definition, and loans that are exempt from the “ability to repay” requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act.  NAFCU is concerned that this new policy will only serve to further constrain the mortgage lending market to qualified mortgage loans.

As we discussed last week, NAFCU has serious concerns about the potential unintended effects of the CFPB’s qualified mortgage rules.  The CFPB intends the rules to ensure that creditors extend loans only to borrowers who have the ability to repay them.  Although lenders may grant non-qualified mortgages, the legal and enforcement risks of doing so are leading lenders to consider whether they are going to limit themselves to only qualified mortgage loans.  The CFPB is aware of this practical implication of its rules and has repeatedly stated that it urges lenders to continue making non-QM loans, so long as lenders continue to consider the ability-to-repay provisions.

The loss of a secondary market for non-qualified mortgage loans may only serve to exacerbate legal uncertainty and limit further the options of borrowers in underserved and rural communities.  Borrowers in such communities may not have the necessary debt-to-income ratios or other characteristics to receive qualified mortgages.  Lenders, already facing the legal and enforcement risks of the CFPB’s regulations, will be left with severely reduced incentives to extend non-qualified mortgages if the FHFA bars Fannie and Freddie from purchasing them.  The end result is that a number of otherwise financially healthy borrowers, who do not meet the stringent qualified mortgage standards for one reason or another, may be denied a mortgage, and the housing market and the secondary housing market will contract, further exasperating the issues facing all involved parties.

NAFCU appreciates the opportunity to share its thoughts on the effects of the FHFA limiting Fannie Mae and Freddie Mac to purchasing qualified mortgages. Should you have any questions or would like to discuss this issue further, please feel free to me at (703)-842-2234 or


Carrie R.  Hunt

General Counsel and Vice President of Regulatory Affairs

cc.  Richard Cordray, Director, Consumer Financial Protection Bureau

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