November 19, 2012
The Honorable Shaun Donovan
Secretary
U.S. Department of Housing and Urban Development
451 7th Street S.W.
Washington, D.C. 20410
Dear Secretary Donovan:
On behalf of the National Association of Federal Credit Unions (NAFCU), the only national trade association exclusively representing the interests of our nation’s federal credit unions, I am writing to you regarding the Federal Housing Administration’s (FHA) and FHA Mutual Mortgage Insurance Fund (Fund) audit report, issued on November 16, 2012.
The FHA has played a critical role in the housing market for approximately eighty years. During the Great Recession, its market share increased dramatically and arguably played a key role in cushioning the fall of the housing market. Unlike many other lenders, credit unions continued to lend despite the significant challenges they faced during the economic downturn. Many credit unions increased their FHA portfolio in recent years and ensured that their members’ mortgage needs are adequately served.
NAFCU believes the nation’s housing finance system should be reformed. In reforming the system, Congress and the Administration should work together to ensure the perpetuation of a government backstop, especially for the secondary mortgage market. Despite the difficulties the FHA has and continues to confront in terms of the Fund, NAFCU believes its contributions during the housing crisis confirm the necessity for a significant role for the federal government in terms of insurance. The FHA should continue to be part of the solution as housing finance reforms are debated and implemented.
While NAFCU strongly supports a healthy and active FHA, we are concerned that some of the actions announced to address the Fund’s liabilities may be too harsh. In particular, we are concerned about the consequences from the announcement that the FHA will reverse a policy that eliminated the requirement for borrowers to pay premiums after a loan reaches 78 percent of its original value, and beginning in fiscal year 2013, the FHA will collect premiums on FHA loans during the entire time the loans are insured. Similarly, we are concerned with the increase of the annual insurance premium paid by borrowers. These actions, essentially, punish future borrowers for others’ past mistakes. And, borrowers will likely see the FHA option as less attractive, which is clearly an unwanted result given that the FHA option is often the only option of many borrowers.
NAFCU understands that the U.S. Department of Housing and Urban Development (HUD) and FHA must act to ensure that the FHA is healthy and viable and the Fund is restored to at least the statutory minimum. We stand ready and willing to work with the HUD and FHA going forward.
I would also like to respectfully request a meeting with you as well as other appropriate HUD personnel to discuss the role of credit unions in the housing market, the health of the FHA and the future of the housing market and housing finance. It is vital that credit unions have a voice in the process.
I look forward to hearing from your office as soon as possible. Should you have any questions or would like to discuss this matter further, please contact me at fbecker@nafcu.org or (703) 842-2215 or Dan Berger, Executive Vice President for Government Affairs at dberger@nafcu.org or (703)842-2803.
Sincerely,
Fred R. Becker, Jr.
President and CEO