New GSE Rules Could Limit CU Housing Finance to Lower Income, Exec Says
A Midwestern housing finance executive fears limiting Fannie Mae and Freddie Mac to buying only qualified mortgages may prevent some credit unions from making mortgage loans to lower income members.
Tim Mislansky, chief lending officer at the 248,000-member, $2.6 billion Wright-Patt Credit Union in Dayton, Ohio, emphasized that the credit union and its wholly owned housing finance CUSO, myCUmortgage, had not yet finished reviewing all of the Consumer Financial Protection Bureau's new mortgage regulations.
He said that qualified mortgages’ cap on fees could wind up hurting lower-income members who are usually buying homes in poorer housing markets or buying smaller, less expensive homes in wealthier markets.
Earlier this week, Fannie Mae and Freddie Mac announced that beginning in January 2014, they would not purchase mortgages which have fees of greater than 3% of the loan amount.
“On a $200,000 plus loan, that's $6,000 and more,” Mislansky observed. “Obviously, there is not a problem coming in under that. But on a $100,000 or less loan, that cap is $3,000 or less and that could be a limiting factor for some credit unions.”
Mislansky said that all the different things that are included in the fee definition have floors to them, prices and costs that cannot be driven lower, and that these prices and costs would make it very difficult to keep a loan's total fees less than $3,000.
Last year, for example, he said that myCUmortgage, which has about 175 credit union clients around the country but primarily in the Midwest, originated $1.5 billion in housing finance spread across 11,000 loans. Of those, Mislansky said, fully 40% were for $100,000 or less.
Mislansky said he expected that credit unions would probably still make these loans, but then would likely have to put them in their own portfolios rather than sell them, right at the time when the NCUA has become more concerned about the levels of interest rate risk credit unions might take on in their portfolios.
“I am confident that they didn't mean for this to be the outcome, but nonetheless I am afraid it will become one of the unintended consequences,” Mislansky added.