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  • Comment Detail

  • Date: 05/05/24
    First Name: Samantha
    Last Name: Roberts
    Organization: N/A
    City: N/A
    State: N/A
    Attachment: N/A
    Number: 2024-N-5

  • Comment

    As a concerned citizen and someone who has worked over 30 years in the mortgage industry, I feel compelled to voice my strong opposition to allowing Freddie Mac to purchase closed-end second lien mortgage loans. This proposed new product is ill-conceived and reeks of the same types of risky, leveraged lending practices that contributed to the housing crisis just over a decade ago. Have we learned nothing?

    At its core, this proposal is about letting the securitization machine profit from piling more debt on American homeowners who have worked hard to build equity in their homes. Freddie and its lender partners get to generate fee income, while layering families with additional levels of mortgage risk they may not fully appreciate long-term. Where is the public interest in that?

    From a credit risk standpoint, these closed-end seconds are simply a more complicated, riskier version of cash-out refinances. The lenders avoid having to re-underwrite the full debt, Freddie gets a new product line, and the borrower gets stuck with a shorter-term, infinite risk loan behind the existing mortgage. History shows these sorts of loans tend to be the first to go delinquent in a housing downturn. Why would we encourage that?

    Then you have to consider the obvious affordability impacts. Helping existing owners further leverage their homes and pull equity out is the opposite of what we should be doing to address the affordable housing crisis. This will only send demand and home prices spiraling even higher, putting homeownership even further out of reach for aspiring first-time and younger buyers. It's a slap in the face to those who have worked hard but still don't have the privilege of owning a home.

    Instead of dreaming up new ways to securitize risk, we should be focusing on opening more opportunities for mortgage lending that actually helps people become homeowners and build longterm, sustainable housing wealth. Doubling down on tilting the playing field even more in favor of investors and those who already have housing assets is the wrong approach entirely.

    I recognize that Freddie and its lender partners are businesses looking for profit opportunities. But as the regulator, FHFA has an obligation to look out for the broader public good and longterm stability of the housing finance system - not greenlight dodgy loan products that raise red flags left and right. This proposal fails that test miserably in my humble opinion.

    I implore Director Thompson and FHFA leadership to put a stop to this misguided proposal. Promote mortgage lending that supports affordable homeownership access and sustainable housing wealth creation. Reject products like this closed-end second that achieve the opposite. Our nation's homeowners and prospective buyers deserve better from their housing finance regulator. Thank you for your consideration.​​​​​​​​​​​​​​​​