WASHINGTON, DC – Michael Calhoun, president of the Center for Responsible Lending (CRL), issued the following statement in support of the Federal Housing Finance Agency’s approval of a Freddie Mac limited pilot program to purchase single-family closed-end second mortgages:

As a research brief CRL co-authored shows, many homeowners have few financially sound options to access their home equity in today’s higher interest rate environment because large banks and credit unions prioritize products for high-income borrowers.

Freddie Mac’s closed-end second mortgage pilot provides a lower-cost alternative for underserved borrowers who otherwise would take out a much more expensive cash-out refinance loan or other higher-rate loan. Freddie Mac’s limited pilot provides financing that fills a critical gap in the market, particularly for underserved and rural borrowers who need to access cash via home equity. The limited size of the pilot also reduces any concerns about crowding out private capital.


With today’s higher mortgage interest rates, taking out first-lien, cash-out refinance loans will damage a homeowner’s long-term financial health because they are replacing their current low interest rate mortgage with a much higher interest rate that applies to the full mortgage, not just the new money they are borrowing. In many cases, access to this second-lien financing will lead to lower monthly mortgage payments relative to a cash-out refinance, which will improve mortgage sustainability.

The pilot also will help Freddie Mac meet its mandate to support broader lending and may encourage smaller institutions to offer more of these financings, creating greater competition among lenders and more choice for consumers.


Press Contact: matthew.kravitz@responsiblelending.org