Statement on FHFA’s Conditional Approval of Freddie Mac’s Purchase of Single-Family Closed-End Second Mortgages

June 21, 2024

WASHINGTON — Seth Appleton, President of U.S. Mortgage Insurers (USMI), issued the following statement on the Federal Housing Finance Agency’s (FHFA) decision to conditionally approve the proposed “Freddie Mac Single-Family Closed-End Second Mortgages” product as a limited pilot, pursuant to the Prior Approval for Enterprise Products Final Rule. This rule is a key pillar in maintaining the safety and soundness of Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs), and ensuring that the public and industry stakeholders have transparency into the GSEs’ proposed activities and products:

“USMI appreciates FHFA’s publication of Freddie Mac’s proposed ‘Purchase of Single-Family Closed-End Second Mortgages’ product for public comment consistent with the Prior Approval of Enterprise Products Rule process. After carefully reviewing the proposal, USMI urged FHFA to disapprove of the proposed product. While today’s announcement includes important limitations to the pilot, further clarifications should be provided including on how loan-to-value (LTV) ratios will be calculated, information about applicable debt-to-income (DTI) limitations, a specific exclusion for ‘piggyback loans,’ and additional details on capital and pricing treatment. USMI recommended that any future expansion of an approved product be subject to additional public notice and comment, and we are pleased that Director Thompson included this policy as part of the FHFA’s conditional approval.

“USMI looks forward to FHFA and Freddie Mac clarifying these issues, as well as the public release of FHFA’s analysis upon the conclusion of the pilot, which will review whether its objectives were met. The private mortgage insurance industry will continue to support programs that enable responsible, affordable, and sustainable access to homeownership, while also promoting safety and soundness in the U.S. housing finance system.”

For more details on USMI’s requested clarifications and comment letter, click here.