Freddie Mac closed-end second mortgage proposal is in public interest

America’s Credit Unions supports the introduction of a new Freddie Mac product to purchase closed-end second mortgages as an alternative to cash out refinances. The Federal Housing Finance Agency (FHFA) proposed the new product in April.

“America’s Credit Unions believes the proposal is in the public interest and advances Freddie Mac’s public mission. We wish to stress that it is important consumers use this process thoughtfully and refrain from exposing themselves to delinquency or default by withdrawing the balance of their savings,” wrote America’s Credit Unions’ Amanda Smith.

“We further believe that Freddie Mac should tailor its product to interact smoothly with the underwriting process and be scalable to higher amounts,” she added. “We also recommend Freddie Mac consider the level of credit risk and the role of Loan Level Pricing Adjustments (LLPAs) when designing its final product.”

Freddie Mac should also share additional pricing details and make the process scalable.

America’s Credit Unions also supports:

  • Equal access to the secondary mortgage market for lenders of all sizes, but is concerned that if too many lightly supervised entities and high-volume lenders participate in this program, delinquencies could rise; and
  • Lowering of LLPAs for cash-out refinances to lower the overall interest rate and make them a more competitive product.
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