WASHINGTON—NAFCU and CUNA have each written letters to the House Financial Services Committee regarding several housing finance-related topics ahead of its hearing to provide oversight of the Federal Housing Finance Agency (FHFA), while also sending letters related to discussions around appropriations.
In its letter to the House committee, NAFCU addressed:
Capital requirements and guarantees
NAFCU said it has been supportive of the FHFA’s efforts to allow government-sponsored entities (GSEs) to help rebuild capital and has advocated for strong liquidity and funding requirements. However, the association said it does not support the cost of increased guaranteed fees as a trade-off, which imposes additional costs on borrowers. NAFCU asked the Committee to urge the FHFA to be transparent in communicating its expectations around guarantee fees.
Climate-related risks
NAFCU shared support for the FHFA’s goals of promoting safe and sound operations at the GSEs and Federal Home Loan Banks noting that credit unions rely on access to the secondary mortgage market for the liquidity needed to make member loans.
The association also shared support for the FHFA’s incorporation of climate change into the GSEs’ governance stating its appreciation for the agency’s focus on “improving climate data collection, analysis, and reporting, as well as evaluating the risks and effects of climate change on the housing finance system.”
NAFCU further encouraged the FHFA’s continued cross-agency collaboration with the NCUA, Financial Stability Oversight Council, and other agencies on analyzing climate change risks.
The association also called for the FHFA to adopt a risk-based approach framework for regulating and supervising the GSEs when it comes to climate risks.
Appraisals
NAFCU recommended the FHFA promote efficiency and cost savings in the mortgage process by streamlining and modernizing the appraisal process. The Biden Administration in March announced its action plan aimed at reducing home appraisal bias, as part of a larger effort to address the sprawling racial wealth gap.
Affordable housing and Community Development Financial Institutions (CDFIs)
NAFCU shared support for the FHFA to establish a Wealth Building Home Loan pilot program that would provide a safer path to homeownership due to borrowers having the ability to generate equity at a faster rate. The association also urged the FHFA to consider pilot programs for low- or zero-down payment mortgage loans that help borrowers build wealth.
CUNA’s Comment
Credit unions are integral to achieving the FHFA’s mission and goals, CUNA wrote.
“In 2021, credit unions originated $315 billion in first-lien mortgages, selling over 35% into the secondary mortgage market,” the letter reads. “Accordingly, credit unions have a substantial interest in the effective functioning of the FHFA-regulated entities, so they meet their core missions to benefit low- and moderate-income borrowers and communities.”
The CUNA letter adds that credit unions:
- Continue to strongly support equal secondary mortgage market access to lenders of all sizes on an equitable basis as a core requirement of the housing finance system
- Are disturbed by the increase in reports of racial discrimination by appraisers reported by the Department of Housing and Urban Development
CUNA said it also supports the Housing Finance Equity Plans released recently by government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which make sure of special purpose credit unions (SPCPs).
‘Significant Interest’
“Credit unions report significant interest in the creation of SPCPs to serve classes of borrowers in their membership that have been historically disadvantaged,” the letter reads. “However, credit unions also report significant concerns regarding the compliance, legal, and reputational risk of inadvertently making an error in the design of these programs.
“Compliantly designed SPCPs offered by the GSEs will go a long way towards closing this gap,” the letter adds. Credit unions hope to see the GSEs’ pilot SPCPs find tremendous success, experience a nation-wide roll-out, and be broadened to address additional classes of borrowers.”
Letters on Appropriations
Separately, NAFCU and CUNA each wrote to House leadership expressing credit union views regarding theFiscal Year 2023 Financial Services and General Government (FSGG) appropriations bill that began consideration this week, along with five other FY 2023 funding measures.
The FSGG bill, which cleared the Appropriations Committee last month, includes $336.4 million in funding for the Community Development Financial Institutions (CDFI) Fund and $4 million in funding for the Community Development Revolving Loan Fund (CDRLF).
However, NAFCU Vice President of Legislative Affairs Brad Thaler noted in NAFCU’s letter that the CDFI Fund is making changes to the certification process that will likely make it more difficult for small and minority depository institution (MDI) credit unions to become certified.
Issues Raised
Thaler addressed that specific credit union concern and others, including:
- A number of credit unions have reported long delays stemming over 12 months to respond to their applications for certification
- Several credit unions currently no longer qualify for the CDFI Fund and have subsequently lost their status as a CDFI without any chance to take remedial action and re-qualify
“This would seem to be contrary to the steps Congress is taking to try to expand the use of CDFIs to help communities in need,” wrote Thaler. “We encourage you to examine this issue and urge the CDFI Fund to address these concerns, such as instituting a cure period for CDFIs that are in danger of losing certification and directing the CDFI Fund and functional regulators, such as the NCUA, to work more closely to reduce burdens on CDFI institutions.”
CUNA’s Letter
In its letter, CUNA stated H.R. 8294 includes appropriate fiscal year 2023 funding levels for priorities important to credit unions and the communities they serve.
“This funding will help to combat the lingering effects of the COVID-19 emergency on the ability of small businesses and individuals to access credit and basic financial services,” CUNA said.
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