Citing potential detriment to low-income and minority borrowers, the Independent Community Bankers of America (ICBA) is encouraging renegotiation of housing finance amendments.
The ICBA, along with its Minority Bank Advisory Council, is urging the Treasury Department and Federal Housing Finance Agency to reopen negotiations regarding amendments to the Preferred Stock Purchase Agreements for Fannie Mae and Freddie Mac that would result in limiting purchases of certain types of loans.
“Amendments to the Fannie Mae and Freddie Mac Preferred Stock Purchase Agreements will disproportionately harm low- and moderate-income and minority borrowers, undermine the economic recovery, widen the minority homeownership gap, and disrupt the housing market,” said James Sills, president and CEO of M&F Bank in Durham, N.C., and chairman of ICBA’s coalition of minority-owned depository institutions. “ICBA and the Minority Bank Advisory Council urge the Treasury Department and Federal Housing Finance Agency to delay implementation of these purchase agreements and reopen negotiations.”
The amendments would, among other actions, limit Fannie and Freddie purchases of single-family loans with at least two high-risk characteristics – loan-to-value ratios above 90 percent debt-to-income ratios above 45 percent and credit scores below 680; limit the percentage of investor properties and second homes to 7 percent of total purchases.
The ICBA and the Minority Bank Advisory Council added the restrictions would negatively and disproportionately impact low and moderate-income and minority borrowers by arbitrarily limiting the types and number of certain loans Fannie and Freddie may purchase and impact the goal of closing the homeownership gap among borrowers of color.