“The skyrocketing of mortgage rates has undermined FHA’s main loss mitigation tool for helping distressed borrowers – and FHA’s nimbleness in finding a workaround for this will be greatly appreciated by distressed homeowners,” Scott Olson, CHLA’s executive director, said in a statement.

“But mortgage rates have been creeping up in recent weeks because of uncertainties, so an agreement that brings some deficit reduction and removes this uncertainty over default can only be a positive development for the mortgage industry,” Olson said in an interview. 

The Community Home Lenders of America (CHLA) sent a letter on Thursday to the Consumer Financial Protection Bureau (CFPB) that urges the agency to adopt and implement a series of rules to protect homebuyers from so-called “dual compensation” arrangements during the homebuying process.

The Community Lenders of America is calling for indemnification rather than forcing agency sellers to repurchase loans. Those mortgage bankers have had to sell these in the scratch-and-dent market at steep discounts at a time when the GSEs have increased the share of loans they review for manufacturing errors.

The Community Home Lenders of America (CHLA) said due to the rapid rise in interest rates over the past year, “our consensus member conclusion is that the average loss to the lender is now 30% on every loan repurchase.”

According to Scott Olson, executive director of the Community Home Lenders of America, it’s not always clear when, how or whether a property will be approved, which can be challenging when working against the “ticking time clock” of a closing date.