WASHINGTON (6/19/13)--The Federal Housing Finance Agency's (FHFA) decision to prohibit government-sponsored enterprises Fannie Mae and Freddie Mac from purchasing mortgages that do not meet the definition of qualified mortgages (QM) could prevent credit unions from working with their members to customize financial products that meet their individual needs, Credit Union National Association President/CEO Bill Cheney wrote in a Tuesday letter to FHFA Acting Director Ed DeMarco.
"The ability of credit unions to customize their products is important because, as member-owned, democratically controlled financial institutions, credit unions understand that every member brings different circumstances to a home purchase transaction...And always look to exhaust every option in order to satisfy a member's needs," Cheney explained. These circumstances may lead to the creation of loans that fall outside the QM box, he added.
"The FHFA decision leaves the impression in the minds of many credit unions that this kind of individualization is no longer welcomed," Cheney wrote.
The Consumer Financial Protection Bureau issued standards to define QMs under the agency's "ability to repay" rules, and mortgage servicing rules, in January. The FHFA's purchasing prohibition would become effective at the same time as the CFPB's ability to repay rules: January 2014.
Loans with terms that do not exactly match certain CFPB QM requirements, such as 40-year loans, or loans with points and fees exceeding the thresholds established by the rule, will not be purchased by the GSEs.
The FHFA will allow the GSEs to continue to purchase loans that meet the underwriting requirements stated in their respective selling guides, including loans with debt-to-income ratios above 43%. Cheney in the letter commended this decision.
However, he wrote, the FHFA's decision could adversely impact "Americans who need the flexibility credit unions provide to their members the most." (See related story: CUNA Tells Lawmakers CUs Merit Full QM Exemption.)