Letter to FHFA on the Proposed Enterprise New Product

Dear Director Thompson:

The American Bankers Association appreciates this opportunity to comment on the Federal Housing Finance Agency's (FHFA) request for comment on a new product proposal by Freddie Mac to purchase single-family closed-end second mortgages on which Freddie Mac already owns the first lien.

As FHFA notes, Section 1321 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended (the Act) requires Fannie Mae and Freddie Mac (the Enterprises) to seek prior approval from FHFA before introducing new products. The Act also requires the Director to provide an opportunity for the public to comment on a new product as part of the required determination of whether the product is in the public interest. Other relevant factors the Director must consider include whether the product is authorized for the relevant Enterprise and if the product is consistent with safety and soundness requirements for the Enterprises.

Based upon these criteria and ABA’s analysis of the information provided by Freddie Mac and FHFA, ABA opposes approval of this new product. Our opposition is based on our assessment that:

• The new product does not meet a need that is not already being met by the private market;
• Freddie has not demonstrated that the program will bring cost savings to borrowers that is not already being provided by the private market;
• It will not benefit Low to Moderate Income borrowers consistent with the broader mission of the Enterprises;
• It is not likely to bring greater stability to the primary mortgage market – and indeed may threaten stability.

In addition to these substantive concerns, ABA has procedural concerns that FHFA should address both about this proposal and before considering any future new product proposals from the Enterprises.

Download the comment letter to read the full text.