As policymakers pursue housing finance reform, ABA President and CEO Rob Nichols joined the heads of four housing trade associations in calling for “thoughtful and balanced” changes. In an American Banker op-ed, they noted that the focus “must be on ensuring responsible, creditworthy Americans in every community of this country can access the capital needed to secure a mortgage—in good times and bad.”
They also encouraged policymakers not to overly rely on a single factor—debt-to-income ratio—to determine lending risk. “Yes, DTI is important. But it is just one of the many considerations lenders use in combination when evaluating whether a borrower can and will repay a loan,” they wrote. “Other factors including credit history, cash reserves, property equity and liquid assets also help paint a more complete picture of a borrower’s true credit profile; and the true risks assumed by a lender.”
The op-ed also highlighted the positive changes that were made since the 2008 financial crisis, and noted the strength of the housing market today as a result. For example, they noted that Fannie Mae and Freddie Mac have transferred more than $90 billion of credit risk to the private sector, which helps to minimize taxpayer risk.