MBA Expresses Concerns over GSE Limits on Second Homes, Investor Properties

The Mortgage Bankers Association said it is concerned over new limits on loan deliveries for second homes and investor properties by Fannie Mae and Freddie Mac.

Last week, Fannie Mae and Freddie Mac began industrywide outreach regarding new limits on second homes and investor properties. The new limits arose from January amendments to the GSEs’ Senior Preferred Stock Purchase Amendments, put in place by the Treasury Department and the Federal Housing Finance Agency. The revised PSPAs require each GSE to cap purchases of second homes and investor properties at 7 percent of total single-family acquisitions over a rolling 52-week period. The revised PSPAs also include limits on “risk-layered” loans (effective immediately, like the limits on second homes and investor properties), as well as limits on cash window deliveries that will take effect in 2022.

MBA raised concerns about these caps—both the level and the ability of the GSEs to implement and manage them efficiently—back in January. Over the past several days, both GSEs have begun to reach out to their lenders about curtailing deliveries of investor and second home loans.

MBA Senior Vice President of Residential Policy and Member Engagement Pete Mills said MBA has raised with FHFA and the GSEs several significant implementation concerns regarding lender-level caps, rather than aggregate GSE level limits on products. “Lenders are getting conflicting and confusing information on how these caps are going to be implemented,” he said. “But in almost all cases, the caps are impacting existing lender commitments to their customers. Hard caps on deliveries do not take into account geographic, seasonal, and other cyclical changes in business mix. This leaves lenders and their customers uncertain about their best loan options.”

MBA President & CEO Robert Broeksmit, CMB, said MBA is receiving a “heavy inflow” of concerned communications with members on the new limits. He said communication thus far between the GSEs and lenders have been marked by inconsistencies.

“Applying these limits at the lender level, rather than managing them at the GSE level, creates the potential for significant market disruption,” Broeksmit said. “We’d like to better understand what flexibility FHFA and Treasury have and whether other approaches from the GSEs would get them below the PSPA thresholds this year, but in a more efficient and less disruptive manner. We are also concerned that these same lender-level caps may also be contemplated for the ‘higher risk’ product limits as well.  This will be particularly problematic for lenders serving low- and moderate-income and first-time buyers. Consumers and lenders need certainty about their loan options and pricing at the outset of the transaction, not when the loan is being delivered.”

MBA has raised these concerns with FHFA and the GSEs, and has asked for further dialogue on implementation that could lead to a less disruptive implementation plan that serves consumers and lenders.  

MBA members who have additional concerns should contact Dan Fichtler at (202) 557-2780 or Sasha Hewlett at (202) 557-2805.