SENATE JOINT MEMORIAL 14

50th legislature - STATE OF NEW MEXICO - first session, 2011

INTRODUCED BY

Mark Boitano and Alonzo Baldonado

A JOINT MEMORIAL

ENCOURAGING MORTGAGE LENDING REGULATORS TO REASSESS AND AMEND THEIR CREDIT POLICIES TO ALLOW MORE QUALIFIED HOMEBUYERS TO OBTAIN MORTGAGE FINANCING.

     WHEREAS, despite record-low interest rates, many well-qualified borrowers in New Mexico are finding it difficult to obtain home mortgages or refinance their home mortgages; and

     WHEREAS, creditworthy small business owners and those who want to purchase investor properties have encountered extreme difficulties in obtaining home mortgages; and

     WHEREAS, federal mortgage lending regulators, including the board of governors of the federal reserve system, the federal housing administration, Fannie Mae, Freddie Mac and the United States department of veterans affairs, have amended their loan origination and underwriting policies as a necessary response to the recent mortgage crisis; and

     WHEREAS, many ethical, knowledgeable and seasoned loan professionals are prohibited from originating good, sensible loans to well-qualified borrowers because of restrictive federal lending regulations and guidelines; and

     WHEREAS, a few years ago, most potential borrowers were able to qualify for loans having loan-to-value ratios even higher than one hundred percent and with lower credit scores; now, origination and underwriting policies have gone to the opposite extreme where it is very difficult to qualify without excellent credit; and

     WHEREAS, tighter underwriting standards, increased credit score requirements and stricter appraisal standards have resulted in excessively tight credit policies that are having negative impacts on home sales and refinancing; and

     WHEREAS, an estimated sixty percent of all borrowers in the United States with a thirty-year fixed-rate loan could lower their interest rate by more than one percent given current interest rates; however, due to stricter loan standards, only thirty-eight percent of borrowers qualify for a refinanced loan, which means that more than twenty-two percent of those who are well-qualified and who could benefit from refinancing are rejected; and

     WHEREAS, if the national estimates are applied to New Mexico, which has approximately two hundred eighty thousand mortgages, approximately thirty-six thousand seven hundred homeowners in New Mexico cannot refinance due to stricter loan standards; and

     WHEREAS, if more New Mexico homeowners were able to refinance their homes and could save an average of two hundred dollars ($200) a month by refinancing at a lower interest rate, they would save up to seven million two hundred forty thousand dollars ($7,240,000) a month, or more than eighty-eight million dollars ($88,000,000) a year; and 

     WHEREAS, if more people in the United States were able to refinance their mortgages, Americans would save more than twenty billion dollars ($20,000,000,000) a year; and 

     WHEREAS, if lending regulators would liberalize their underwriting standards, returning them to a more reasonable and normal level, millions of dollars would be injected into the state economy and billions of dollars would be injected into the national economy; and

     WHEREAS, changing the unnecessarily tight underwriting criteria not only would help well-qualified potential borrowers, people who are willing to stay well within budget and meet reasonable underwriting criteria, but also would benefit the entire housing market and the economy as a whole; and 

     WHEREAS, the federal housing administration, Fannie Mae, Freddie Mac and the United States department of veterans affairs have a public mission to provide mortgage liquidity to qualified homebuyers, including low- and moderate-income families and first-time homebuyers; and

     WHEREAS, this mission is being impaired by limits on the availability of credit; and

     WHEREAS, lending regulators should look for ways to increase the availability of credit to a broader range of qualified homebuyers; and 

     WHEREAS, reassessing and amending credit policies not only would help individual, well-qualified potential borrowers but also would benefit the entire housing market, which is currently suffering from an excess supply of housing and unduly tight underwriting criteria;

     NOW, THEREFORE, BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO that it respectfully encourage federal mortgage lending regulators to reassess and amend their credit policies so that more homeowners can refinance their current home loans and more qualified homebuyers can obtain mortgage financing; and

     BE IT FURTHER RESOLVED that copies of this memorial be transmitted to the board of governors of the federal reserve system, the commissioner of the federal housing administration, the chief executive officers of Fannie Mae and Freddie Mac, the secretary of veterans affairs and the members of the New Mexico congressional delegation.