CUNA to FHFA: Don’t Forget the Smallest Credit Unions

The Federal Housing Finance Agency must tailor its programs to ensure that small credit unions have access to its secondary markets, Elizabeth LaBerge, the Credit Union National Association’s senior director of regulatory advocacy and council told the agency Thursday.

“The FHFA must continue to keep small lender access top of mind to ensure that the housing finance market continues to operate to the benefit of American consumers,” LaBerge told agency officials during a “listening session” on single family small lender access.

LaBerge said that in 2020, more credit unions offered more mortgages than in the previous five years. Credit unions saw an average of 10.4% growth in first mortgages, she said, adding that credit unions with assets between $50 million and $250 million experienced an average growth rate of 10.8%. She said that credit unions between $250 million and $500 million experienced 13.6% growth in mortgages.

“Given these factors, access to a liquid secondary market with relatively low transaction costs is vital for the health of credit union mortgage lending and to ensure credit unions can meet member need,” she said

As of the third quarter of 2020, credit unions sold 41.2% of their first mortgages on the secondary market, an increase of 4.9%. year-over-year.

“The secondary market must be open to lenders of all sizes on an equitable basis,” LaBerge said.

LaBerge said that the trade group also urges the FHFA and the housing Government Sponsored Enterprises to increase their focus on affordable housing. She said that the lack of affordable housing is particularly serious in high-cost markets.

“While the FHFA may not be able to do anything regarding the price of Canadian lumber, there are other opportunities to ease this challenge,” she added.

LaBerge said that the GSEs’ use of the area median income in their affordable lending products fails to accurately capture the economic conditions in some areas. For instance, she said, in high-cost areas the area median income calculation does not consider extremely high earning people in certain neighborhoods.

She added that the FHFA should allow for the expanded use of so-called “drive-by appraisals,” during which an appraiser does not enter a home but evaluates it from the outside. “Borrowers remain concerned that the appraisers need to enter their home for an interior inspection,” she said, adding that appraisers are in high demand.

Finally, LaBerge said that the FHFA should consider adopting a program that would ensure that the smallest credit unions have access the secondary market. These credit unions often lack sufficient personnel to meet the secondary market’s requirements.

“These credit unions and their members, which are often low-income or underserved, would benefit from a clearer and less expensive path toward the benefits of selling on the secondary market, for example through a formal program offered by the FHFA,” she said.

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