Department of Housing and Urban Development Secretary Shaun Donovan told mortgage bankers this week about two down payment scenarios that would qualify for an exemption to risk-retention rules. He also talked about Obama administration achievements, higher guarantee fees and potential improvements to a federal program for refinances.
Donovan made his comments Tuesday at the Mortgage Bankers Association 98th Annual Convention & Expo in Chicago.
The administration expects to raise guarantee fees charged by Fannie Mae and Freddie by 10 basis points, a move Donovan said will level the playing field between the secondary lenders and the private sector.
He also discussed efforts to bring private capital back into the mortgage market.
“During the financial crisis, we saw how bundling and packaging mortgages to sell on Wall Street with no accountability led to an erosion of lending and underwriting standards that fed the housing boom, deepened the housing bust and put countless homeowners in unsafe mortgage products,” Donovan stated.
He explained that the “qualifying residential mortgage” rule is designed to define the characteristics of a “safe” loan that would be exempt from the Dodd-Frank act’s risk-retention rules.
Donovan acknowledged the resistance to the proposed QRM down payment requirements, but he warned that the debate can’t “become so narrow that down payment becomes the only qualification for homeownership.”
Two down payment alternatives for the QRM were outlined.
One option would require a 20 percent down payment, while an alternative would be available with a 10 percent downpayment combined with a mix of private mortgage insurance and credit enhancements.
Donovan touted Obama administration accomplishments. He claims that the administration’s moves to keep interest rates low were responsible for more than 13 million refinances since April 2009 — a strategy that has saved borrowers $20 billion a year.
The secretary said that 11 consecutive months of year-over-year declines in foreclosures reported by RealtyTrac were credited to administration policies.
Intensive discussions are being held about easing requirements for the Home Affordable Refinance Program, and a plan is expected within “the next couple of weeks.”
