Wednesday, May 27, 2009
Lenders Pushing for More CRA Programs... Its A good Thing
CRA programs from 1990 to 2000 offered fantastic opportunities for home loan consumers via great entities like Nationwide and NorthAmerican mortgage. Two great companies that were gobbled up by big box banks Cal Fed and Washington Mutual. These CRA loans were written with sensible debt ratios and had capped loans to moderately priced homes that have always been the bread and butter of the industry- great loans with low default rates.
Lenders are pushing the Federal Housing Finance Agency to open up Fannie Mae and Freddie Mac to purchase mortgages that banks originate to satisfy their Community Reinvestment Act obligations. CRA was created in 1977 to spread homeownership opportunities across more economic demographics.
"The GSEs have made it a practice of avoiding CRA-related mortgage loans," the Consumer Mortgage Coalition says in a comment letter to FHFA. "We would encourage FHFA to implement this statutory mandate even though HUD failed to do so," CMC executive director Anne Canfield says.
The GSE regulator is in the process of revising Fannie's and Freddie's affordable housing goals for the first time. The National Association of Affordable Housing Lenders says the GSEs continue to ignore $50 billion of CRA-eligible multifamily loans that banks are forced to hold in portfolio. The FHFA proposal only requires Fannie and Freddie (combined) to purchase $9 billion of affordable multifamily loans in 2009. "We urge you to withdraw this proposal, and reconsider how the GSEs can better support the recovery," says Judy Kennedy, NAAHL president and chief executive.
Stimulating the bottom end of the housing market tends to trickle up sales spurred by move up buyers.
