NAHREP Statement on Revisions to PSPA requirements
The National Association of Hispanic Real Estate Professionals® (NAHREP®) applauds the U.S. Treasury Department and Federal Housing Finance Agency (FHFA) for their recent announcement that they are suspending certain restrictions added in January to the Preferred Stock Purchase Agreements (PSPAs). The PSPA is a contract that outlines the financial relationship between the U.S. Treasury and the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac while in conservatorship. Reversing these restrictions has been a top NAHREP policy priority and the organization welcomes this timely change.
The restrictions previously added in January 2021 to the PSPA restricted both the volume of “high-risk” loans Fannie Mae and Freddie Mac can purchase, as well as the volume of second homes and investor properties, disproportionately impacting Latino families. Following the reversal of these restrictions, Latinos will be better able to continue building wealth through homeownership, in order to continue to drive housing market growth.
The previous policy disproportionately impacted the Latino community for the following reasons:
- Latinos are more likely to be considered to be in the “high-risk loans” category than the general population.
- Latinos generally have lower credit scores, higher debt-to-income ratios, and a higher propensity to purchase homes with lower down payments than the general population.
- Latinos are increasingly likely to own an investment property, often at the expense of other investment vehicles, such as retirement accounts and stock-based investments.
The potential for this policy reversal to have on the Latino community is significant:
- Latinos are the future of the housing industry. According to the Urban Institute, 70% of homeownership growth over the next 20 years will come from Latinos.
- Latino homeowners have 28 times the net worth of Latino renters, $171,900 compared to $6,210 in 2019. Homeownership drastically improves a household’s ability to build wealth.
- Latinos are driving investment property ownership. Between 2016 and 2019, Latinos increased their rate of investment property ownership by 33.1 percent. In contrast, the non-Hispanic White and non-Hispanic Black populations, as well as the general population overall, saw declines in investment property ownership during the same time period. However, investment property ownership has become harder for communities across the board after these changes were implemented last January.
NAHREP believes these changes and the other proposed actions will create significant momentum that will help bridge the racial and ethnic wealth gap through real estate acquisition.
“We applaud the proposed revisions to PSPA requirements as it is important that we create an environment that reflects the realities and needs of the communities that are driving growth in the housing market,” said Gary Acosta, Co-Founder & CEO of NAHREP. “NAHREP will continue to work closely with the administration and our federal agencies to advance these changes and to continue to drive policy that helps bridge the U.S. racial and ethnic wealth gap.”
The National Association of Hispanic Real Estate Professionals® (NAHREP®), a nonprofit 501(c)6 trade association, is dedicated to advancing sustainable homeownership for the Hispanic community in America. NAHREP has a network of over 40,000 real estate professionals and 100 local chapters nationwide, hosting several national events per year and publishing multiple industry cornerstone reports annually and multimedia content. Join us in advocating for policies that grow sustainable Latino homeownership, read our 2021 policy priorities here. Also, see the NAHREP Hispanic Homeownership by Congressional District Tool which measures Hispanic homeownership by U.S. congressional district, allowing constituents, advocates, policy makers, and lending and housing professionals to evaluate district performance at a glance.