Most credit union and CUSO mortgage programs will see minimal impact from Fannie Mae and Freddie Mac's limiting the secondary market to only qualified mortgages, according to credit union and CUSO executives.
The two government-owned housing finance giants announced Monday that their regulator, the Federal Housing Finance Administration, had ordered the move to take effect on Jan. 10, 2014.
At that point, they will no longer buy loans that don’t conform to the Consumer Financial Protection Bureau’s qualified mortgage rule.
Housing finance executives from both credit unions and CUSOs reported that their programs almost overwhelmingly wrote mortgages that conform to Fannie May and Freddie Mac's automated underwriting standards and thus were qualified mortgages already.
Victor Patroni, CEO of Mortgage Markets CUSO, a CUSO which provides housing finance services to roughly 25 Connecticut credit unions reported that his CUSO writes mortgages that conform already to Fannie and Freddie underwriting standards and only rarely underwrite loans that don't.
For example, a very few of their member credit unions have needed a mortgage loan underwritten with a term of longer than 30 years and those loans would no longer be allowed to be sold on the secondary market beginning in January 2014.
“I think we might have underwritten five of those (40-year) loans in the last five years,” Petroni said. “They're just not a big part of our business.”
Bill White, vice president of residential lending at the 85,000-member, $1.2 billion NASA Federal Credit Union, said his credit union did make loans that do not conform to Fannie and Freddie guidelines and would continue to do so, but would keep those in its own portfolio.
Maryland-based NASA FCU is one of the credit unions which have begun offering 100% no money down housing finance loans with careful underwriting. Those loans cannot be sold to Fannie or Freddie already.
Paradoxically, White said there was a chance that Fannie and Freddie making it clear that they were only taking qualified mortgages might also open the way for others to start markets for loans which did not qualify for Fannie Mae and Freddie Mac but which remained good loans.
“We have been watching developments in that space for some time and now we might see that accelerate,” White said.