Multiple Policy and Legislative Announcements to Impact Mortgage Lenders
Written By: Joel Palmer, Op-Ed Writer
It’s been a busy month for legislation and policy changes that could impact mortgage underwriters and processors.
Legislation that was re-introduced in early June aims to expand the supply of affordable homes while helping low to moderate-income buyers and existing owners.
The Affordable Housing Bond Enhancement Act (S. 1805) is bipartisan legislation introduced by Senators Catherine Cortez Masto (D-NV) and Bill Cassidy (R-LA). The act is designed to help homebuyers through changes in the Mortgage Revenue Bond (MRB) and Mortgage Credit Certificate (MCC) programs.
The original bill was introduced about a year ago.
MRBs are a type of municipal bond used by state housing finance agencies (HFAs) to finance low-interest mortgages for low- and moderate-income home buyers. Interest on these bonds are exempt from federal income tax, therefore they pay a lower rate which is then passed on to borrowers.
In addition, HFAs can also use their MRB authority to issue Mortgage Credit Certificates (MCCs), which provide a nonrefundable federal income tax credit for part of the mortgage interest qualified home buyers pay each year. The MCC program is a flexible subsidy source, which can be adjusted depending on the incomes of different home buyers.
The legislation would permit MRBs to be used to refinance home loans. It would also increase the MRB home improvement loan limit from $15,000 to $50,000. And it would eliminate a lender reporting requirement.
“Mortgage Revenue Bonds and Mortgage Credit Certificates historically have been the state housing finance agencies’ primary tool for financing affordable homeownership opportunities for working families, having helped nearly 4 million home buyers combined,” said Stockton Williams, executive director of the National Council of State Housing Agencies.
In another move that targets a specific group of homeowners, The Department of Housing and Urban Development (HUD) announced a fee change aimed at helping Native American mortgage borrowers.
HUD, through the Office of Native American Programs, announced reductions to the Upfront Loan Guarantee fee and the Annual Loan Guarantee fee charged to homebuyers who obtain a Section 184 Indian Home loan.
The Upfront Loan Guarantee fee will be reduced from 1.50 percent to 1.00 percent and the Annual Loan Guarantee fee will be reduced from 0.25 percent to 0.00 percent for homebuyers seeking a Section 184 guaranteed loan.
In a separate policy move aimed at Native Americans, Freddie Mac recently launched a new mortgage product called HeritageOne.
Freddie said the program “will provide affordable financing options for single-family properties on tribal lands in rural areas,” and “will also provide financial counseling and other resources to members of Native American tribes, especially first-time homebuyers.”
“With HeritageOne, we are again breaking new ground in our efforts to safely and responsibly expand opportunities in traditionally underserved communities,” said Sonu Mittal, Single-Family Senior Vice President of Acquisitions at Freddie Mac. “Our commitment to make home possible for Native American families not only requires long-term planning and prudent execution, but strong partnerships with industry members and tribal leaders. Through this collaboration, we can help create more affordable mortgage options in tribal lands and rural areas.”
HeritageOne is part of Freddie Mac’s 2022-2024 Duty to Serve Plan, which details its commitment to provide housing support for tribal members in rural tracts within Indian Country.
There also continues to be legislative and policy debate regarding the controversy over up-front loan level pricing adjustments charged by Fannie Mae and Freddie Mac.
The upfront loan level pricing adjustment (LLPA) structure is a risk-based pricing tool to encourage responsible lending and to protect taxpayers from undue risk.
On May 1, new upfront fees for purchase and rate-term refinance loans went into effect on mortgages secured by Fannie Mae and Freddie Mac. FHFA has been criticized by multiple industry groups and Republican lawmakers since announcing redesigned and recalibrated pricing grids for upfront fees in January 2023.
Public pressure has already caused FHFA to rescind a new upfront fee for certain borrowers with a debt-to-income above 40 percent, that was announced in January, scheduled to take effect May 1, then delayed to August 1 before it was cancelled.
Rep. Warren Davidson (R-OH) recently introduced legislation in late May to cancel all the LLPA changes made by FHFA.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
