WASHINGTON (3/24/14)--Housing finance reforms must be considered in a comprehensive way, not broken out as piecemeal changes, the Credit Union National Association warns in a comment letter to the Federal Housing Finance Authority.
Last year that agency proposed a plan that could gradually reduce maximum loan limits by more than 4% for loans eligible to be purchased by Fannie Mae or Freddie Mac.
"As you know, Congress is currently actively looking at a number of ways to reform the housing finance system," CUNA President/CEO Bill Cheney wrote to FHFA Director Mel Watt, a former member of Congress. "Any legislation to reform the housing finance system will establish a system that may last for decades, and Congress should have the opportunity to address loan limits as part of a comprehensive package...We recommend that FHFA not take any action on loan limits as conservator of the (government-sponsored enterprises) until Congress first acts."
The GSEs are of crucial importance to credit unions that sell and service mortgage loans. In 2012, credit unions originated $123 billion of first mortgages, or about 6.5% of the total mortgage origination market. Although credit unions traditionally are portfolio lenders, the number of credit union loans sold has almost doubled from 2009 to present, to an average of 52%.
Cheney wrote that CUNA believes the new housing finance system should apply a reasonable conforming loan limit that adequately takes into consideration local real estate costs in higher cost areas.
Under the plan, the current statutory maximum loan limit for one-unit properties would decline from $417,000 to $400,000. The FHFA said the loan purchase limit would be reduced by the same percentage in other parts of the country, including high-cost areas in the contiguous states where current limits are set at $625,500. Those loan purchase limits would be set at $600,000, according to the FHFA.
The CUNA leader went on to say that it is "an open question" as to whether FHFA even has the legal authority to lower loan limits without a statutory change.
"In section 1124 of the Housing and Economic Recovery Act of 2008 (HERA), Congress modified the charter acts for the GSEs to set forth a requirement that loan limits be adjusted annually to reflect housing prices. However, in setting $417,000 as the baseline for single-family residences, Congress required that loan limits not be adjusted downward."
Comments were due March 20.
Use the resource link to access CUNA Comment Letters.