WASHINGTON—NAFCU is advocating for more loan options, especially for low-income families, in its comment letter on the Federal Housing Finance Agency's (FHFA) 2018–2020 housing goals for government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.
The association said it generally supports the proposed rule, but NAFCU Regulatory Affairs Counsel Ann Kossachev argued that focusing the single-family market on purchasing 30-year, fixed-rate mortgages is "too narrow" because it omits alternatives that would better assist very low- and low-income families.
To address this concern, Kossachev recommended GSEs offer loans with a zero or low down payment and shorter amortization terms to help first-time homebuyers purchase and build equity on a home.
One option, stated Kossachev, is the Wealth Building Home Loan (WBHL), which is currently offered by more than 20 lenders and three credit unions.
According to Kossachev, WBHL's key features include:
- A 15- or 20-year fully amortizing loan
- Either a fixed interest rate or a two-step rate structure
- Strong underwriting
- A zero or low down payment
"When properly structured, such loans for single-family homes are less risky than a 30-year, fixed-rate loan," Kossachev said. "In fact, during the financial crisis, 15-year loans defaulted only a third as often as otherwise identical 30-year loans, and 20-year loans defaulted only half as often as identical 30-year loans."
NAFCU noted that it supports the FHFA's 2018–2020 housing goals, provided they encourage a pilot program for WBHLs or similar mortgage loans. NAFCU said doing so will inject much-needed liquidity into the mortgage industry and allow credit unions to help their members own a home.