Government-Sponsored Enterprise Challenges and Agency Guidance Request

WISCONSIN HOUSING AND ECONOMIC DEVELOPMENT AUTHORITY PARTICIPANTS

• Joaquín Altoro, WHEDA CEO
• Kim Plache, WHEDA Deputy Executive Director
• Sherry Gerondale, WHEDA CFO

PRIORITY 1:

Government-sponsored enterprises Federal Housing Finance Agency, Fannie Mae and Freddie Mac have enacted new fees and ill-advised program changes with little input and no meaningful opportunity for stakeholder comment. These sweeping changes harm low- to moderate-income borrowers and reduce access to state housing finance authority products, in turn reducing access to credit.

CONGRESSIONAL ASK:

• Engage with leaders of FHFA, Fannie Mae and Freddie Mac to encourage reversal of program changes that have raised costs and curtailed loan eligibility for first-time and low- to moderate-income homebuyers.
• Provide feedback to leaders of FHFA, Fannie Mae and Freddie Mac that imposing fees and program changes without adequate notice or stakeholder feedback has weakened the state-federal partnerships necessary for Fannie Mae, Freddie Mac and housing finance authorities.

BACKGROUND:

In June 2019, with little notice or opportunity to provide meaningful feedback on the proposed changes, Fannie Mae began charging state housing finance authorities new, upfront fees on single family loan pools. In addition, certain WHEDA borrowers now pay higher interest rates and mortgage insurance costs. For some borrowers, on the average WHEDA loan this means an increased monthly mortgage payment of $119, or more than $1,432 per year. This change alone reduces the number of low- to moderate-income borrowers that qualify for homeownership.

Since the end of 2018, Fannie Mae has tightened credit parameters three times and eliminated one key loan program designed for first-time homebuyers. The “risk” modifications to GSE automated underwriting tools were specifically targeted at the typical characteristics of first-time and low- to moderate-income borrowers. These tightening moves resulted in a 21% increase in loan denials. Fannie Mae’s total submitted denial rate on WHEDA loans now stands at 40%. When this change is compared to WHEDA’s calendar year data from 2018-2019 single family loan volume, these tightened credit standards have reduced the number of WHEDA’s low- and -moderate home purchasers served by 1,523 and 795 families, respectively. This translates to respective drops in low- to moderate-income funding provided of $68 and $88 million.

Fannie Mae implemented additional tightening of “risk characteristics” on March 13, 2021. The stated goal is to further lower perceived risk associated with the lower down payment, lower credit score and monthly debt load for borrowers typically seen with low- to moderate-income buyers. Fannie Mae’s projection forecasts another reduction in loan eligibility of about 4%.

Although these serious issues are not subject to legislative remedy, it is imperative for leaders of FHFA, Fannie Mae and Freddie Mac to understand the devastating impact of these programmatic decisions on the people of Wisconsin – in particular, the state’s underserved communities. WHEDA requests support from Wisconsin’s Congressional delegation to share these important message with GSE leaders.

PRIORITY 2:

Use existing federal programs targeting underserved communities to the fullest potential.

CONGRESSIONAL ASK:

• Provide guidance regarding WHEDA’s interest in securing Minority Business Development Agency funds to promote and advance the growth of minority business enterprises.

BACKGROUND:

On Feb. 17, 2021, the Minority Business Development Agency, a bureau of the U.S. Department of Commerce, announced it would provide $14.3 million in federal assistance to support innovative projects that promote and ensure the growth of minority enterprises. The agency’s Business Center Program provides technical assistance and business development services to minority business enterprises.

WHEDA and its stakeholders – including community development financial institutions – see a great need for these services to support Wisconsin’s minority business surprises. However, while Minnesota, Illinois and Michigan qualified for this money, Wisconsin did not.

Program information indicates states were selected according to “the size and ranking of minority populations in each state, the overall number of employer minority firms in states, and other available research, data, and information.” An initial review by WHEDA has identified data that would appear to support Wisconsin’s inclusion among the states chosen for this program.

Since the funding decisions were not determined by statute, WHEDA requests guidance in contacting the U.S. Department of Commerce to gain further information regarding the selection process and the potential for Wisconsin participation.Congressional Visits: 03/23-26/21