It’s been discouraging to see the efforts by the Federal Housing Finance Agency and the Federal Home Loan Banks to divert resources from responsible first time home buyer assistance and education to instead support mortgage re-financing for home owners who are in trouble. Yes, our economy is hurting because of home owners facing foreclosure, and many of those troubled home owners were the victims of terrible lending practices, while some have only themselves to blame. But the Federal Home Loan Banks shouldn’t be allowed to divert the home ownership set-aside funds from their mandated “Affordable Housing Programs.” They should be identifying other resources for mortgage re-financing so as to preserve what’s available for first time home buyer assistance at a time when our economy would benefit from responsible first time home buyers coming into the market.
I haven’t followed all the details of this “proposed rule” and “public comment” process, but it sounds like the banks are close to getting the change they want in order to receive more aid in restructuring their previously issued bad loans. In June, CFED was encouraging folks in the asset-building field to speak out against the change. Now, CFED must feel there’s no doubt the rule is going into effect in some form, and their advocacy is focused on requiring the member banks to at least provide a 2:1 match out of their own resources for any mortage re-financing funds they use from the “Affordable Housing Program” allocation. I hope some letter-writing might get that provision re-instated in the final rule. Here’s what I put in my letter (borrowing heavily from CFED’s template):
I write to comment on the Federal Housing Finance Agency (FHFA) interim final rule to require the FHFA to allow the the Federal Home Loan Banks (Banks) to use Affordable Housing Program (AHP) homeownership set-aside funds to refinance mortgages.
I am deeply concerned that the FHL Banks would be allowed to re-allocate funds from low-to moderate-income first time home buyer assistance in providing resources for mortgage-refinancing. We should provide some opportunities for relief to home owners who are in danger of foreclosure because of inappropriate lending practices, but not by taking away resources that are a critical part of our country’s infrastructure for making responsible home ownership feasible for low-to moderate-income families.
At a minimum, the FHFA should demand a $2 match from participating financial institutions for every $1 received from the AHP for foreclosure mitigation. The Federal Housing Finance Board’s original proposal included this requirement.
The Banks, in cooperation with other federal and state efforts to mitigate the foreclosure crisis, should first utilize other funds already available to them and demonstrate their impact before tapping into a reliable source of homeownership assistance already seen as a critical part of the pipeline for affordable homeownership.
This concern has not been adequately addressed in this Interim Rule.
The FHFA has substantial flexibility to require some local buy-in before enabling a member financial institution to take resource from new, first-time low-income homeowners at a time where it is more difficult to get mortgages.
Fingers crossed that the interim rule gets improved a bit before it’s finalized. I’ll be watching to see how it impacts the terrific first time home buyer programs funded through the Federal Home Loan Bank of Boston.