MBA urges FHFA to increase income limits of GSE low down payment programs

Increased affordability for minority borrowers

Outlining the reasons and recommendations, MBA president and CEO Robert Broeksmit asserted: “Raising the AMI limits to expand access to these programs would still be beneficial as there are key features of Home Ready and Home Possible loans, such as a 3% down payment, that make homeownership attainable for historically underserved borrowers. The recent changes in increasing affordability, paired with expanded access, could have a considerable impact.

“Access to capital required for a down payment is often a barrier, or even the sole barrier, blocking these borrowers from purchasing a home. Both Equitable Housing Finance Plans highlight this barrier, noting that White borrowers are about 30% more likely to be able to access $3,000 from family or friends to help with this cost. The wealth gap for minorities has been well documented, and as FHFA has noted, this lack of capital largely stems from discriminatory practices like redlining, which have prevented communities of color from building wealth through homeownership for generations. For this reason, Black families are less likely to have received or expect an inheritance. An increase in the AMI threshold could better serve minority borrowers who have the means to meet their monthly mortgage obligations but may lack family resources or wealth to assist with a larger down payment.”

An example given is data analysis from two of the nation’s largest home builders showing that increasing the AMI has a significant impact on affordability and access to their communities for Home Ready and Home Possible borrowers.  

“In one instance, for homes priced $350,000 or less, raising the AMI to 100% makes about 40% more of that builder’s communities available to these borrowers,” Broeksmit wrote. “The second builder showed that there was a consistent increase in affordability in a small sample set of about 100 communities across four states. Based on their measures for eligibility, at 80% of AMI, none of the communities in that sample would be available to Home Ready or Home Possible borrowers but increasing the AMI to 100% would make about 13% available.”

Monitoring impact

MBA also encouraged the housing watchdog to explore opportunities to reach additional underserved borrowers by increasing the income thresholds in targeted geographies and through a “special purpose credit program” that raises the income limits even higher (i.e., 120% or 150%) for Black and Hispanic borrowers.