Swalwell Leads Bay Area Effort to Protect Homebuyers from Damaging FHFA Proposals

October 31, 2013
Press Release

PLEASANTON, CA – U.S. Representative Eric Swalwell (CA-15) led a letter of Bay Area Members of Congress to Edward DeMarco, the Acting Director of the Federal Housing Finance Agency (FHFA), opposing two proposals that could destabilize the greater San Francisco Bay Area’s recovering housing market. The FHFA is considering lowering the Fannie Mae and Freddie Mac loan limits across the country, which would reduce available credit and restrict Bay Area homebuyers who are bound by an expensive housing market. In addition, the FHFA has proposed possibly requiring minimum down payments as high as 30 percent for borrowers who seek the best rate and terms through a “qualified residential mortgage” (QRM), making qualifying for a mortgage impossible for many in the Bay Area.

“Owning a home is a key part of the American dream, and these proposals by the Federal Housing Agency will put that dream out of reach for too many Bay Area residents,” said Swalwell. “Many of my constituents already feel priced out of the expensive Bay Area housing market. I am proud to lead this effort so prospective home buyers may still access reasonable credit to purchase a home and be able to afford a down payment. I urge the FHFA to reject these shortsighted proposals that will adversely impact the Bay Area and the health of our recovering housing market.”

Rep. Swalwell was joined on the letter by Reps. Zoe Lofgren, Anna Eshoo, Jackie Speier, Barbara Lee, Mike Honda, Mike Thompson, Sam Farr, John Garamendi and Jerry McNerney.

The text of the letter is below. A PDF of the letter is available here.

October 30, 2013

The Honorable Edward DeMarco

Acting Director Federal Housing Finance Agency

400 7th Street, SW

Washington, DC 20024

 

Dear Acting Director DeMarco:

We are writing to oppose two proposals currently being explored by the Federal Housing Finance Agency (FHFA) that could destabilize the greater San Francisco Bay Area’s recovering housing market: 1) a proposed decrease in the conventional conforming loan limit and 2) a proposal that “qualified residential mortgages” (QRMs) require higher minimum down payments – as high as 30 percent – through an alternative plan known as “QRM-Plus.”

On Monday, September 9, in a statement to The Wall Street Journal, the FHFA revealed the agency’s intent to possibly lower Fannie Mae and Freddie Mac loan limits across the country.  This proposal would cause a significant reduction of available credit for potential homebuyers, especially for those in a housing market as unique as ours in the greater Bay Area.  The Bay Area is known to have some of the highest housing costs in the country, and consequently has one of the highest maximum conforming loan limits.  The limit in much of this area is set at $625,500.  While higher than the limit set in most of the country, in a market with as much demand as the Bay Area’s, this limit is already restrictive.  The median price for a home in the Bay Area is already higher than this limit, and in many areas, significantly so.  In San Ramon,California, for example, the median price is $770,000 – well above the current conforming loan limit.  A lower loan limit would likely hurt demand, put homeownership out of reach for too many, and bring a halt to the greater Bay Area’s housing market recovery.

The FHFA, along with five other federal regulatory agencies, also is considering altering the metrics used to designate a mortgage as a QRM through a set of proposed regulations known as QRM-Plus.  Among the proposals being considered is a mandatory 30 percent down payment for borrowers who seek the best rate and terms through a QRM.  With a median home price over $500,000, this means that the required down payment under the proposed QRM regulations in much of the greater Bay Area would be in excess of $150,000.  This would whittle the pool of those who can acquire QRMs down to a lucky few.

If minimum down payment requirements were increased to a figure as high as 30 percent, the vast majority of homebuyers in the greater Bay Area would then have to pay higher rates and fees for non-QRMs, or simply be turned down.  This change would be especially detrimental to communities of color and other underserved communities, many of whom we represent in an area as diverse as the Bay Area.  According to the 2009 American Housing Survey, three-quarters of African-Americans put down 10 percent or less on mortgages, while forty-four percent of Hispanic buyers put down less than five percent.  Setting the minimum down payment required for a QRM at 30 percent would make qualifying for a mortgage impossible for far too many of our Bay Area constituents.

At a time when the housing market is finally showing signs of strength, now is not the time to pull the rug out from under it.  These two changes would, taken independently, hurt credit accessibility and the ability for many Bay Area residents to become homeowners.  Implemented simultaneously, the impact would be devastating on our housing market – putting homeownership completely out of reach for many low and middle income families in the Bay Area and would be especially detrimental to communities of color and other underserved communities looking to achieve the dream of homeownership.

We urge you to maintain the current levels of conforming loan limits and to reject QRM requirements that would set the minimum down payment at 30 percent.

Sincerely,

Eric Swalwell

Member of Congress

 

Zoe Lofgren

Member of Congress

 

Anna G. Eshoo

Member of Congress

 

Jackie Speier

Member of Congress

 

Barbara Lee

Member of Congress

 

Michael M. Honda

Member of Congress

 

Mike Thompson

Member of Congress

 

Sam Farr

Member of Congress

 

John Garamendi

Member of Congress

 

Jerry McNerney

Member of Congress

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