The National Association of Federally-Insured Credit Unions (NAFCU) is urging the Federal Housing Finance Agency (FHFA) to assist the government-sponsored enterprises (GSEs) in increasing opportunities for underserved individuals to purchase homes.
“NAFCU has previously encouraged the FHFA to consider pilot programs for low- or zero-down payment mortgage loans that help borrowers build wealth,” NAFCU President and CEO Dan Berger wrote in a letter to Sandra Thompson, acting director of the FHFA. “The FHFA should launch such pilot programs and consider additional programs targeted toward buying mortgages from Community Development Financial Institutions (CDFIs) as this will help underserved borrowers and first-time homebuyers achieve homeownership while allowing credit unions to better support their communities. Collectively, such programs will go a long way in closing the racial homeownership gap.”
Berger added that more opportunities are available to the GSEs that can help further close the homeownership gap and ensure that they benefit the individuals and communities that most need them. One example is the Wealth Building Home Loan (WBHL) program.
“WBHL is structured as either a 15- or 20-year fully amortizing loan with either a fixed interest rate or a two-step rate structure, strong underwriting, and zero or low-down payment. WBHL provides a safer path to homeownership because it generates equity at a faster, more rapid rate. Traditionally, building equity faster meant high down payments, making it nearly impossible for underserved borrowers to attain wealth. Programs such as the WBHL allow for a little to no down payment as well as building equity at a faster rate,” Berger wrote.
Further, Berger urges the FHFA to create a separate pilot program to allow GSEs to buy non-conforming loans from Community Development Financial Institutions (CFDFIs).
“Despite serving predominately low-income and underserved communities, CDFIs are most times found to be more efficient than mainstream financial institutions,” Berger stated. “Credit unions that are classified as CDFIs are best situated to originate loans to the communities most in need.”