The CFPB must provide paths for LMI home buyers that will be harmed by any expiration of GSE Patch

The Consumer Finance Protection Bureau (CFPB) yesterday released an Advanced Notice of Proposed Rulemaking signaling the end to the so-called “GSE Patch” which allows Fannie Mae and Freddie Mac to back mortgage loans to borrowers that exceed the 43% cap on debt-to-income – a cap included in the CFPB’s Qualified Mortgage rules. Lenders that originate loans in compliance with CFPB’s Qualified Mortgage/Ability to Repay (QM/ATR) standards are protected from future lawsuits. 

Jesse Van Tol, CEO of the National Community Reinvestment Coalition (NCRC), made the following statement: 

“Since the financial crisis, the CFPB’s QM rules have helped ensure that the nation’s financial institutions provide low- and moderate-income (LMI) families with prudent and sustainable mortgage loans. The GSE Patch has allowed Fannie Mae and Freddie Mac to back loans to many first-time home buyers, minority borrowers and rural families that simply would not have been able to buy a home otherwise. 

“We are concerned that the CFPB is eliminating the only viable path to homeownership for many LMI borrowers that have had the toughest time accessing mortgage credit since the crisis – homeownership that has helped generations of working-class Americans build wealth over time.  

“The CFPB must provide alternatives that ensure that the LMI borrowers benefiting from the GSE Patch today continue to have viable paths to homeownership. Other housing finance policies now being considered by the administration could further limit access for LMI borrowers, exacerbating wealth gaps that have grown since the financial crisis. Policies under review at FHA, FHFA and at the bank regulators could all be game-changing for LMI borrowers.   

“We are already deep into an affordable homeownership crisis. It is critical that the GSEs, as well as federal credit programs like FHA, respond to the private market failures that are leaving too many LMI families who aspire to homeownership underserved.  

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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