Credit unions express concerns about 'buy-back' provisions

Credit unions expressed concern on Monday that mortgage loan buy-back policies would reduce access for other small lenders in the secondary mortgage market.

Dan Berger, executive vice president of government affairs for the National Association of Federal Credit Unions (NAFCU), is concerned that Fannie Mae and Freddie Mac could require credit unions to agree to buy-back provisions as part of a larger policy to ensure that they purchase or insure only mortgages that meet certain criteria.  

"The consequence of such policies, we fear, would create inequity as regards access to the [government-sponsored enterprises] between the largest mortgage lenders, who are far more able and equipped to handle such requirement, and credit unions and other smaller lenders," Berger wrote in a letter to Federal Housing Finance Agency (FHFA) Acting Director Ed DeMarco. 

If the FHFA, which oversees Fannie and Freddie, should require the provision, NAFCU is concerned that there will be at least two highly undesirable results.

He argues that the policies would disproportionately affect credit unions because they don't have the volume of loans or enough capital, and it would also reduce the number of available products on the market. 

If policies requiring buy-back provisions are adopted for those loans that are not qualified mortgages, as defined last week by the Consumer Financial Protection Bureau, "the market can only be expected to further contract to absorb very few mortgages outside that QM realm," Berger wrote.

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