Regulatory Proposals Target Underserved Mortgage Markets
Written By: Joel Palmer, Op-Ed Writer
As rising mortgage rates stifle the mortgage market, a pair of regulatory agencies are pitching ideas to spur growth in underserved markets.
The Consumer Financial Protection Bureau (CFBP) has invited the public to present ideas for new mortgage products.
Specifically, the bureau wants ideas for improving mortgage refinances for homeowners who have smaller loan balances. Additionally, the agency seeks public input on ways to support automatic short-term and long-term loss mitigation assistance for homeowners who experience financial disruptions.
The CFPB said it will use the input it receives to consider how to support household financial stability and address refinance market gaps, which it says are part of a broader effort to promote competition and innovation in consumer finance markets.
“The mortgage market has not provided products that allow all households to save money by refinancing at a lower interest rate,” said CFPB Director Rohit Chopra. “We are eager for input on ways that borrowers taking out loans today can refinance to lower rates in the future.”
The bureau points out in its announcement that mortgage refinancing is more challenger for borrowers who have smaller loan balances, which often includes Black and Hispanic borrowers.
“Refinancing volume has dropped dramatically, down almost 70 percent from last year, as interest rates have risen. New streamlined and automatic refinancing mortgage products could make sure that those buying a home now, or refinancing to cover other needs, are able to benefit from the next interest rate drop,” the CFPB said in its announcement.
Meanwhile, the Federal Housing Finance Agency (FHFA) wants to increase liquidity in underserved communities known as colonias.
FHFA has proposed amending its Enterprise Duty to Serve Underserved Markets regulation to add a definition of “colonia census tract,” which would serve as a census tract-based proxy for a “colonia,” and to amend the definition of “high-needs rural region” in the regulation by substituting “colonia census tract” for “colonia.” The proposed rule would also revise the definition of “rural area” in the regulation to include all colonia census tracts regardless of their location.
A colonia has traditionally been defined as a city neighborhood or rural settlement inhabited predominantly by Mexicans or Mexican Americans.
“FHFA is committed to promoting affordability, equity, and sustainability in the nation’s housing finance markets, especially in underserved communities,” said FHFA Director Sandra L. Thompson. “With this rule, we seek to remove barriers that have hindered the enterprises’ Duty to Serve activities for people living in colonias.”
FHFA noted that only 123 single-family loans originated in colonias were purchased by Fannie and Freddie between 2018 and 2021. That compares with 62,000 in rural tracts in Middle Appalachia and 41,000 in the Lower Mississippi Delta.
In the rule proposal, FHFA identified two challenges that have hindered the enterprises’ Duty to Serve activities in colonias. The first challenge is an operational one that prevents the enterprises from easily identifying and verifying Duty to Serve-eligible loan purchases and outreach activities in colonias. The second challenge is related to the ability of the Duty to Serve program to effectively target households in colonias due to their under-inclusion in the Duty to Serve regulation’s current “rural area” definition.
Both agencies are accepting public comments on their proposal through the end of November.
To comment on the CFPB’s request for mortgage refinancing ideas, go to www.regulations.gov or email Mortgage_Refinances_And_Forbearances@cfpb.gov. Include Docket No. CFPB- 2022-0059 in the subject line of the message.
To comment on the FHFA’s proposed rule amendment, you can use the agency’s website: www.fhfa.gov/open-for-comment-or-input. You can also go to www.regulations.gov or email FHFA at RegComments@fhfa.gov. Include the following information in the subject line of your submission: Comments/RIN 2590-AB22.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
