The American Bankers Association today said it opposed a proposal by Freddie Mac to purchase single-family, closed-end second mortgages on which the enterprise already owns the first lien, arguing there is no justification for the new product offering.
The Federal Housing Finance Agency in April proposed the new product to provide borrowers with a lower-cost alternative to a cash-out refinance in higher interest rate environments. But in a letter to the agency, ABA said the product doesn’t meet a need that’s not already addressed by the private market. The association also said that Freddie has not demonstrated that the product will bring cost savings to borrowers that are not already being met by the private market, nor will it benefit low- to moderate-income borrowers or bring greater stability to the private mortgage market.
“ABA also questions whether it is appropriate for Freddie Mac to consider this product while still in conservatorship and still lacking sufficient capital to back even their existing book of business,” ABA said. “While strides have been made by both enterprises under the guidance and conservatorship of the FHFA under multiple administrations, it remains a fact that the enterprises have not been sufficiently recapitalized and that permanent reforms—preferably locked in through legislation—have not been enacted.”
