GSE reform

From affordable housing policy to GSE conservatorship, the next president will wield a heavy influence on mortgage and housing policies.

A recent ruling declaring the Consumer Financial Protection Bureau’s structure unconstitutional signaled that a similar outcome awaits the Federal Housing Finance Agency. But the FHFA will argue in a new case that it does not deserve the same fate.

Legal experts say it is now more likely that the Supreme Court will strike down the single-director governance framework for Fannie Mae and Freddie Mac’s regulator.

In a letter to Director Mark Calabria, 17 organizations requested an additional 60 days to weigh in on the proposal meant to strengthen Fannie Mae and Freddie Mac's balance sheets post-conservatorship.

The Supreme Court threw out a key statutory provision concerning the agency’s leadership structure, but the presidential election and possible legislative reforms could bring about more changes to the embattled bureau.

An imminent high court ruling about the independence of the bureau's director, coupled with an election victory for Joe Biden, could doom a plan to extend GSEs' exemption from tough debt-to-income requirements on mortgages.

The Consumer Financial Protection Bureau plans to change the definition of what constitutes a qualified mortgage from a 43% debt-to-income limit to a price-based threshold, and further extend a temporary exemption given to Fannie Mae and Freddie Mac.

As they prepare to exit government conservatorship, Fannie Mae and Freddie Mac have enlisted the investment banks to help them boost capital and evaluate market opportunities.

The FHFA’s proposal is intended to strengthen Fannie Mae and Freddie Mac, but many experts warn that it could boost guarantee fees for lenders that they say may be passed on to borrowers.

Some observers wonder if proposed regulatory targets for Fannie Mae and Freddie Mac will stoke concerns about low shareholder returns. But others suggest those fears are unfounded.

The much-anticipated proposal, which would not go into effect until after Fannie Mae and Freddie Mac are privatized, reflects Director Mark Calabria’s aggressive efforts to get the companies on a strong financial footing.

Director Mark Calabria, who abandoned the Fannie and Freddie capital proposal written by his predecessor, said he expects a revised framework to be ready “very soon.”

The two mortgage giants said they would begin the process of hiring outside firms to help raise capital that will be needed to exit conservatorship.

Fannie Mae and Freddie Mac are now able to buy loans in forbearance to alleviate pressure on the sector, but the fees charged by the mortgage giants to assume more risk could turn away some originators.

Federal Housing Finance Agency Director Mark Calabria said a virus-induced financial crisis might give rise to more delinquencies and foreclosures than the 2007 subprime mortgage meltdown.

FHFA Director Mark Calabria said the health crisis will complicate the release of a proposal establishing new capital requirements for Fannie Mae and Freddie Mac.

The Federal Housing Finance Agency authorized the government-sponsored enterprises to contribute $502.2 million to two funds that help preserve and build affordable housing.

Fannie Mae and Freddie Mac are expected to retain “limited and tailored government support” after they are released from U.S. control, Treasury Secretary Steven Mnuchin said in a letter to lawmakers.

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