The Federal Housing Finance Agency's interim rule governing new product and activity approval for the government-sponsored enterprises "espouses rigorous safety and soundness principles without undue constraints," the Mortgage Bankers Association told the regulator.

"We believe effective GSE oversight requires constant supervision throughout the business cycle of a product or activity, not just at the initiation or approval stage," the MBA told the agency in a comment letter dated today.

The housing legislation passed in July 2008 gave the agency power over the products and activities Fannie Mae and Freddie Mac introduce into the mortgage market.

Though the association was generally supportive of the Finance Agency's interpretation of the law, the trade group said the regulator could publish its decisions about products and activities online.

Clarification was also sought over language the trade group said could be interpreted as threatening GSE executives with jail time if they lied to the Finance Agency about a product or activity.

"Although this is unlikely what the FHFA intended, MBA believes the interim rule would be improved by establishing gradations of specific supervisory consequences that will be taken depending on the degree of materiality of the misrepresentation or omission," the trade group wrote. Comments on the rule are due today.

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