WASHINGTON, D.C. – U.S. Senator Bob Menendez today introduced the Promoting Access to Credit for Homebuyers Act that would ensure low and middle-income homebuyers have fair access to mortgage credit during the COVID-19 pandemic which has caused an unprecedented surge in forbearances.
“This pandemic has caused financial distress on families across the country and has shone a light on the economic disparities that exist,” said Sen. Menendez. “Buying and owning a home is part of the American Dream. We must ensure that homebuyers facing financial strain are not arbitrarily denied access to mortgage credit throughout this emergency. This bill will help remedy the Trump Administration’s ongoing failure to support hard working families and consumers facing hardship and delivers critically needed stimulus to our economy.”
The CARES Act established certain protections for homebuyers, such as forbearance, to help them weather the economic downturn caused by the pandemic. In response, Freddie Mac and Fannie Mae, both government sponsored enterprises (GSEs), and the Federal Housing Administration (FHA) have imposed a new penalty on lenders when purchasing mortgages that have taken advantage of CARES Act protections. Lenders may therefore overcharge or deny mortgages to borrowers who might inquire about, request, or receive mortgage forbearance – putting low and middle-income homebuyers at a severe disadvantage.
According to a new analysis by the Urban Institute, the new penalty imposed by FHA and GSEs “has significantly constricted the credit box in the last three months, threatening to block approximately 225,000 borrowers from mortgage access.”
The Promoting Access to Credit for Homebuyers Act would require GSEs and the FHA to continue to purchase or insure mortgage loans that they otherwise would have purchased or insured, regardless of whether the borrower has entered into mortgage forbearance due to a COVID-19 hardship, without imposing additional burdensome restrictions or costs on borrowers or lenders. Congressman Juan Vargas (Calif.-51) introduced companion legislation in the House of Representatives in May.
“Latinos have accounted for over half of all homeownership growth in the U.S. over the past decade and are the drivers of homeownership demand in the U.S., accounting for over 40 percent of household formation growth. The future of the housing industry rests on ensuring that lending conditions are conducive to this continued growth,” said Sara Rodriguez, National President, National Association of Hispanic Real Estate Professionals (NAHREP). “And yet, policies that result in more restrictive credit scores, debt-to-income ratios and down payment requirements disproportionately impact the very communities that will contribute to the economic growth the U.S. so desperately needs at this moment. NAHREP applauds Senator Bob Menendez and U.S. Representative Juan Vargas for introducing the Promoting Access to Credit for Homebuyers Act that will ensure communities of color can contribute to US economic growth by making homeownership more accessible.”
“We are in the middle of a public health crisis, and no American should needlessly suffer because of this pandemic,” said National Association of Realtors®President Vince Malta. “This bill guarantees that temporary forbearance does not lead to permanent damage to the American economy. We thank Sen. Menendez and Rep. Vargas for their leadership on this legislation—it is another needed tool to ensure a swift economic recovery and protect innocent homeowners.”
“The Mortgage Bankers Association strongly supports this legislation introduced by Senator Menendez that would mitigate the economic impact of COVID-19 on the housing market and protect borrowers from additional pricing constraints on their mortgage loans,” said Bill Killmer, Senior Vice President of Legislative and Political Affairs at the Mortgage Bankers Association. “The legislation rightly removes penalties associated with borrowers seeking assistance provided under the CARES Act, while also promoting access to credit that is essential to a broadly-shared economic recovery.”
“NAHB commends Sen. Menendez (D-N.J.) for introducing the Promoting Access to Credit for Homebuyers Act. This legislation will support the housing market in uncertain times by ensuring that Fannie Mae and Freddie Mac continue to provide much-needed housing credit during the pandemic,” said Chuck Fowke, Chairman, National Association of Home Builders.
The legislation is also endorsed by the Center for Responsible Lending.
Text of the bill can be found here.
October 29, 2020