“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