The Federal Housing Finance Agency (FHFA) will not reduce loan limits and will continue allowing Fannie Mae and Freddie Mac to purchase loans when the borrower has a debt-to-income (DTI) ratio of higher than 43% but also has other compensating strengths, Director Mel Watt said in a speech Tuesday.
The FHFA also released a strategic plan today for the future of the government-sponsored enterprises (GSEs)--one in which the agency will not involve itself in policy decisions on housing reform.
"The announcement about loan and DTI limits is welcome news for borrowers and credit unions alike. CUNA has repeatedly urged that loan limits not be reduced and we are gratified that this position has been accepted," noted Eric Richard, Credit Union National Association general counsel, who added, "The health of the housing finance market requires that the current system be kept viable as long as possible until Congress acts on reforms and we are pleased that the agency is taking steps to help ensure that outcome."
CUNA has also urged that the FHFA make it clear that creditors will be able to continue selling to the GSEs mortgage loans involving a borrower's DTI that is higher than 43%, the threshold for a "qualified mortgage" under the Consumer Financial Protection Bureau's "Ability to Repay" rule, when the borrower has the capacity to repay the loan.
CUNA President/CEO Bill Cheney and senior CUNA staff met with Watt and members of his team in April.
"Our task is to continue to fulfill our statutory mandates, to execute our Strategic Plan and to manage the present status of Fannie Mae and Freddie Mac," Watt said in prepared remarks at the Brookings Institution.
"This means, first and foremost, that we must ensure that Fannie Mae and Freddie Mac operate in a safe and sound manner. It means that we'll work to preserve and conserve Fannie Mae and Freddie Mac's assets," he said, adding, "It means that we'll work to ensure a liquid and efficient national housing finance market."
Because it is not part of the agency's statutory mandate, the FHFA will not take on housing finance reform legislation. "My guess is that there were many people who expected that I would start talking about reform legislation the minute I got to FHFA," Watt said.
"I am well aware, and regularly express my belief, that conservatorship should never be viewed as permanent or as a desirable end state and that housing finance reform is necessary. However, Congress and the Administration have the important job of deciding on housing finance reform legislation, not FHFA."
He also announced:
The agency will be working to stabilize communities hardest hit by foreclosures with a Neighborhood Stabilization Initiative with Fannie Mae, Freddie Mac and the National Community Stabilization Trust; and
Eligibility parameters for the Home Affordable Refinance Program will not be extended, but the agency is retargeting its outreach efforts.