CUNA Comment Letter
CUNA Comments on Proposed Interagency Appraisal and Evaluation Guidelines
March 9, 2009
Office of General Counsel
Department of Housing and Urban Development
451 Seventh Street, SW - Room 10276
Washington, DC 20410-0500
|RE:||Docket No. B-2009-F-03 - Hope for Homeowners Interim Final Rule|
Dear Sir or Madam:
The Credit Union National Association (CUNA) appreciates the opportunity to comment on the interim final rule that changes many aspects of the Hope for Homeowners (H4H) Program in which eligible homeowners may be able to refinance their subprime mortgage loans into fixed-rate, Federal Housing Administration (FHA)-backed loans. Under the interim final rule, subordinated lienholders who participate in the program and agree to release their liens will be eligible to receive an up-front payment from the FHA at the time the loan is refinanced in lieu of receiving a payment when the property is sold at a later date. The interim final rule also includes a number of other changes that are intended to enhance the H4H Program. CUNA represents approximately 90 percent of our nation's 8,200 state and federal credit unions, which serve approximately 92 million members.
Summary of CUNA's Comments
- CUNA supports the enhancements outlined in the interim final rule that are intended to increase the attractiveness of the H4H Program for both borrowers and lenders, especially the provisions that will allow for up-front payments to subordinated lienholders.
- In general, credit unions view the process of qualifying as an FHA-approved lender to be very burdensome, and CUNA is interested in working with the FHA to discuss how the process may be streamlined.
Under the H4H Program, eligible homeowners have the opportunity to refinance their subprime mortgage loans into fixed-rate, FHA-backed loans. The H4H program also allows the subordinated lienholders to share in any future appreciation of the property as a means to encourage them to participate in the program, and the H4H Board of Directors issued a final rule last year that outlines how any future appreciation is to be shared with the subordinated lienholders.
The Emergency Economic Stabilization Act (EESA) that was enacted last year allows the FHA the option to pay an amount up-front to the subordinated lienholder at the time the loan is refinanced in lieu of making a payment when the property is sold. The interim final rule implements these EESA provisions and allows the subordinated lienholder to receive 3% of the subordinated loan balance if the cumulative loan-to-value ratio exceeds 135% or 4% if this ratio is less than or equal to 135%.
The interim final rule implements additional changes, which include the following:
- increases or modifies the allowable loan-to-value and debt-to-income ratios for new mortgages that are covered under the program;
- an increase from 30 to 40 years in the maximum term of the mortgages covered under the program; and
- Changes to the equity sharing provisions so that borrowers who have equity in their homes at the time they are eligible to participate in the program will not have to share the initial equity with the government.
CUNA generally supports the efforts of the federal government to develop voluntary loan modification programs to assist those borrowers who are no longer able to meet their mortgage payment obligations. This includes subprime mortgage loans that are characterized by high rates with large interest rate re-sets, negative amortization, lack of sufficient underwriting, or other indicators of fraud.
Unlike other financial institutions, credit unions have not originated these types of subprime mortgage loans, but they may have made home equity loans that are subordinated to these subprime loans. To the extent credit unions may have originated subprime, first-lien mortgage loans that would qualify under the H4H Program, these were underwritten in a responsible manner, although borrowers may now be having difficulty making loan payments due to changes in their employment situation or other unforeseen circumstances.
For these reasons, CUNA specifically supports the enhancements outlined in the interim final rule that are intended to increase the attractiveness of the H4H Program for both borrowers and lenders, especially the provisions that will allow up-front payments to subordinated lienholders. Since the H4H Program is voluntary, each credit union will be able to assess for itself as to whether accepting the up-front payment is a reasonable option.
On a related matter, we note that lenders originating loans under the H4H Program must be FHA-approved lenders. Although few credit unions are currently FHA-approved lenders, interest among credit unions in becoming approved is very high. However, credit unions view the process of qualifying as an FHA-approved lender to be very burdensome and, for this reason, CUNA is interested in working with the FHA in an effort to reduce these burdens.
This effort will benefit credit unions by facilitating their ability to originate FHA loans, which is important since the number of FHA loans has increased significantly in recent years and now comprises a significant percentage of all new mortgage loans. Reducing these burdens will also benefit the FHA and borrowers in general because credit unions have maintained their ability to provide mortgage loans, even in the current difficult economic environment, as a result of their conservative underwriting practices. This is in contrast to other types of lenders that have recently curtailed their lending activity. Credit unions can serve an important role in making FHA loans if the burdens of becoming an FHA-approved lender can be reduced.
CUNA has discussed how credit unions can increase their participation in both the FHA and Ginnie Mae programs with representatives from the FHA and Ginnie Mae on several occasions over the past year, and we look forward to continuing this dialogue. We hope this exchange will include additional discussions on how to facilitate the process of becoming an FHA-approved lender, along with continuing the process of increasing awareness among credit unions regarding the value of participating in the FHA and Ginnie Mae programs.
Thank you for the opportunity to comment on the interim final rule that implements changes to the H4H Program. If you or other agency staff have questions about our comments, please contact Senior Vice President and Deputy General Counsel Mary Dunn or me at (202) 638-5777.
Senior Assistant General Counsel