NAFCU President & CEO Fred Becker said that while a Federal Housing Finance Agency principal forgiveness program wouldn’t directly affect credit union mortgages, such a program could filter through to credit unions that do business with Fannie Mae and Freddie Mac.
Becker said in the past, Fannie and Freddie have challenged credit union underwriting when mortgages sold to the GSEs have defaulted and caused a loss. It’s not just big banks that have been questioned regarding whether they “crossed every T and dotted every I as far as what the borrower was claiming,” he said.
A principal forgiveness program could also create significant confusion for consumers, who already have difficulty determining whether their mortgages are owned by Fannie or Freddie, he said. And, Becker agreed with FHFA Director Edward DeMarco and others, who say such a program would incent borrowers who are current to become delinquent in hopes of principal forgiveness.
DeMarco has historically been “stalwart” against any type of principal forgiveness plans, and has been vocal about protecting taxpayers, Becker said; but, the NAFCU Chief said DeMarco seems to be softening his position.
“There’s a lot of people underwater in the country and there’s pressure to help them,” Becker said. “But, the money has to come from someplace, either from the taxpayer, bank stockholders, or credit union members. Nothing happens in a vacuum.”