FHFA Approves Freddie Second-Lien Pilot but With Strict Limits
Mike SP
The Federal Housing Finance Agency late Friday issued a conditional approval to a controversial pilot program proposed by Freddie Mac that would allow the government-sponsored enterprise to acquire closed-end second liens.
Among the constraints: The program will operate for 18 months with a cap of $2.5 billion in acquisitions. The maximum loan amount is set at $78,277, subject to adjustments for inflation.
FHFA sought comments on the proposal in April. Industry participants largely opposed the measure, claiming it included insufficient details and was unnecessary.
However, FHFA Director Sandra Thompson said the conditional approval of the pilot “was informed by the numerous comment letters received as well as considerations required by law.” Among other factors, she noted that Freddie’s charter allows the GSE to acquire second liens and that the product will provide an alternative to cash-out refinances.
Monday morning, research firm Keefe, Bruyette & Woods issued a report, saying, "Given the modest scale of the announced pilot program, there should be no meaningful impact on the mortgage market."
