NAMB warns of ripple effects if GSEs adopt FHA’s loan restrictions
The National Association of Mortgage Brokers (NAMB) is calling on the Federal Housing Finance Agency (FHFA) to avoid implementing restrictions that would limit mortgage access for non-permanent residents, following a controversial decision by the government to exclude such borrowers from Federal Housing Administration-insured (FHA) loan programs.
In a letter sent to FHFA director Bill Pulte, NAMB expressed concern that the recent FHA policy change, set to take effect May 25, could hurt housing activity, reduce borrower diversity, and have unintended social and economic consequences.
As of May 25, non-permanent residents will no longer be eligible for FHA-insured mortgages, a change HUD says is meant to align with its immigration and housing priorities. NAMB is asking the FHFA to avoid replicating the move for Fannie Mae and Freddie Mac.
“FHA’s recent move to remove this borrower category from its Single-Family Title I and II programs effectively blocks these individuals from using FHA-insured loans,” NAMB wrote. “If FHFA were to follow suit with similar policy changes at the GSE level, the impact could be far-reaching.”
The letter outlined several risks. NAMB warned of a potential market contraction due to a smaller eligible borrower pool, saying it could slow homebuying activity and affect home values. It also cautioned that removing reliable borrowers from the pipeline could lead to less diversified portfolios and increased concentration risk for lenders.
“Non-permanent residents often contribute to the vibrancy and diversity of communities. Limiting their access to homeownership could have adverse social implications,” NAMB’s letter stated.
Under previous FHA rules, non-permanent residents had been eligible for insured mortgages as long as they met certain criteria: the property was a primary residence, the borrower held a valid Employment Authorization Document (EAD), and had a Social Security number. Many borrowers in this category include those on H-1B or O-1 visas, DACA recipients, and others waiting on permanent residency decisions.
Read next: Why giving DACA recipients access to FHA loans is good for the mortgage business
“Non-permanent residents who meet stringent eligibility criteria have demonstrated their commitment and ability to fulfill long-term financial obligations,” NAMB said.
The association emphasized that Fannie Mae and Freddie Mac have historically provided mortgage access to non-permanent residents on the same terms as US citizens. Changing that now could disrupt homeownership goals for thousands of borrowers.
“We believe that a balanced approach that considers the contributions and reliability of non-permanent residents as borrowers is essential,” said NAMB president Jim Nabors. “We respectfully request that FHFA engage with industry stakeholders, including NAMB, to discuss the potential impacts of policy changes on this segment of borrowers and explore alternative measures that uphold both market stability and inclusivity.”
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