8/18/2023 0 Comments Lifetime ghost of christmas past![]() ![]() It’s all in their affordability goals and, while complicated, we can already see distortions. There is the implementation of goals focused on LIP (low income purchase loans) and VLIP (very low income purchase loans) that could result in a number of unintentional distortions to pricing and credit availability. And while these modest changes to LLPAs might help, there is far more that impedes the ability of the GSEs to be effective in this area.īut FHFA hasn’t stopped there. In the most recent May release, they show just how hard it is for the GSEs to expand access to minorities who make up a significant share of new first-time homebuyers.Īs the chart above shows, it’s the Ginnie Mae programs, FHA in particular, that completely dwarf the efforts of the GSEs in this regard. The Urban Institute puts out a monthly chart book that is chock-full of incredible data about our marketplace. You see, the LLPA changes, while small in impact, were just part of the slippery slope of adjusting fees and policies to make the GSEs do business differently and to get them to focus more on entry-level homebuyers. And DeMarco responded, almost completely eliminating the pricing differences during his tenure.īut today we have more to be concerned with. I remember early in my career at MBA taking three CEOs of independent mortgage banks to meet with then Acting FHFA Director Ed DeMarco to argue against any price disparity based on anything but the actual risk of the loan. The spread in pricing between a large seller and a small one was significant. Prior to the collapse of Fannie and Freddie, pre 2008, the GSEs would give preferred pricing to their largest sellers in what was known as “alliance” agreements. In fact, MBA traditionally argued that g-fees and other pricing methods at the GSEs should only reflect the actual risks of the loans and not be used for other purposes. While the latest was this clearly manipulated LLPA pricing structure and the now failed attempt at a DTI cap, the list of fees added to 2-4 unit homes, second homes, cash-out refinances, and more appear to be focused on political objectives and not actual risk. As each succeeding FHFA director comes into the role the industry, potential homeowners, lenders and more will face the risk of a cascading series of policy initiatives being implemented by the GSEs at the behest of the FHFA, regardless of whatever protests that may come from the respective staffs at either GSE. In fact I testified in front of Congress in 2017 stating such.īut today I now see the risks of letting this drag on into perpetuity without resolve. ![]() The Mortgage Bankers Association argued that Congressional reform should precede any effort to release the GSEs. Make no mistake about it, I sat firmly entrenched for years opposing the “recap and release” crowd, to the point where the camps on both sides of the issue were in almost pitched warfare. What’s the greater risk to housing: an endless series of FHFA directors who change seats with each political administration and then proceed to tinker with policy in pursuit of political priorities? Or, the risk of releasing Fannie and Freddie without firmly legislating some of the reforms that I and many others advocated for, going back to the early years of conservatorship? For me, it’s really a question about the lesser of two evils. One of the great concerns I have, as both a former regulator and the former head of a major industry trade association, is the downside risk of keeping the GSEs in conservatorship any longer. ![]() After the recent extraordinary show of force defending changes to LLPAs by federal regulators and their friends, the forest through the trees risk remains in focus to me. ![]()
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