Community Home Lenders Association Touts Role of Non-Banks in FHA Lending –
Response to Article by Moody’s Economist
Contact: Scott Olson
The Community Home Lenders Association (CHLA), today sent a joint letter (enclosed) to Mark Zandi, Chief Economist at Moody’s, touting the increasing role that non-bank mortgage lenders have played in recent years in originating FHA loans, and rebutting recent written comments made by Mr. Zandi that were critical of non-bank lenders. CHLA sent the letter jointly with the Community Mortgage Lenders of America (CMLA).
The Washington Post recently published an article by Mr. Zandi (see link at bottom), which stated that non-bank mortgage lenders are not up to the task of filling the lending void left by the banks, that they don’t have the needed capital, and that they may put taxpayers at risk in the next downturn.
In the joint response letter, CHLA, the only national association that exclusively represents non-bank mortgage lenders, stated that:
“We are writing to rebut each of these claims and to inquire whether you have any data or evidence to back them up.”
The letter went on to make the following points in rebuttal:
- The non-bank share of the overall mortgage market has doubled in recent years from 25% to 50% – and their share of GNMA securitizations has grown from 20% to 60% – as many banks exited the market or imposed credit overlays on lower FICO score borrowers
- Non-bank lenders, like all FHA lenders and GNMA securitizers are required to hold appropriate capital for these activities, and since they generally don’t hold loans in portfolio, they don’t have the need for capital that banks who retain their loans do
- The evidence to date is that it is banks, and not non-banks that have been the major risk to taxpayers – with banks being responsible for the great majority of False Claims act violations and being the recipients of hundreds of billions of dollars in TARP funds after the 2008 housing crisis.
The letter also closed by questioning a claim in the Zandi letter that risk sharing will keep interest rates down – noting that risk sharing entities “will demand a transfer of G fees at least equal to the risk they are taking on.”
LINK TO ARTICLE BY MARK ZANDI: