Becker engages FHA, lawmakers on strategic defaults
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Feb. 6, 2012 – NAFCU President and CEO Fred Becker on Friday urged the Federal Housing Administration and Housing and Urban Development Department to increase the current lockout period for FHA loans to those who strategically default on their home loans and implement other policies to discourage the practice.
The NAFCU president also called on the leaders of the House Financial Services Committee, the House Oversight and Government Reform Committee and the Senate Banking Committee to set hearings to examine the troubling trend of strategic defaults.
Writing to HUD Secretary Shaun Donovan, Becker said NAFCU wants to ensure the FHA is not the “go-to place” for homeowners who strategically walk away from their mortgage obligations. “We do not believe that current FHA policy provides adequate disincentives against strategic defaults in the housing market,” he said.
Current FHA policy bars those who strategically default on their mortgages from securing another FHA loan for at least three years. Fannie Mae prohibits such borrowers from obtaining a Fannie-backed mortgage for seven years.
Becker acknowledged the drastic decline in home values that millions of Americans have experienced in recent years. While credit unions were not involved in the practices that led to the financial crisis, they’ve been helping their members find “creative yet responsible solutions,” he added. Deterring homeowners from walking away from their mortgages is important, since foreclosures not only affect the borrowers involved, but their neighbors and community members as well, he said.
“NAFCU believes that the HUD, FHA and the administration should leave no stone unturned in finding creative solutions to the housing crisis,” Becker said. He also noted the association’s support for recently announced changes to FHA’s streamlining program that aim to address the housing crisis. “We believe changes to FHA’s policies discouraging strategic defaults will similarly help in this process,” Becker said.
Taking case to Capitol Hill
Becker, in letters to congressional committee leaders, noted the increasing number of borrowers who are capable of meeting their obligations, but are choosing to walk away. He said the current FHA and HUD policies on strategic defaults are failing to dissuade homeowners from strategically defaulting on their mortgages. He added that the committees they play an important role in ensuring HUD and FHA review their strategic default policies.
“It is very important that those with an ability to pay are not encouraged to walk away from their homes,” said Becker.
The letters went to House Financial Services Chairman Spencer Bachus, R-Ala., and Ranking Member Barney Frank, D-Mass.; House Oversight and Government Reform Chairman Darrell Issa, R-Calif., and Ranking Member Elijah Cumming, D-Md.; and Senate Banking Chairman Tim Johnson, D-S.D., and Ranking Member Richard Shelby, R-Ala.