FHFA Making Moves

The Federal Housing Finance Agency has been making some big moves this week.

On Tuesday the FHFA announced that they had suspended certain provisions added to the Preferred Stock Purchase Agreements with Fannie Mae and Freddie Mac…(FHFA)

• The suspended provisions include limits on the Enterprises’ cash windows (loans acquired for cash consideration), multifamily lending, loans with higher risk characteristics, and second homes and investment properties.

• Acting Director Sandra L. Thompson said in a statement, “This suspension will provide FHFA time to review the extent to which these requirements are redundant or inconsistent with existing FHFA standards, policies, and directives that mandate sustainable lending standards,”

Former FHFA Director Mark Calabria has long been an opponent of Fannie & Freddie buying second homes telling Congress in 2011 that they should “prohibit the purchase of mortgages for investment properties and second homes…”

On Wednesday the FHA announced that are seeking comment on a notice of proposed rulemaking that would amend the Enterprise Regulatory Capital Framework for Fannie Mae and Freddie Mac…(FHFA)

• Replace the fixed prescribed leverage buffer amount equal to 1.5% of an Enterprise’s adjusted total assets with a dynamic PLBA equal to 50% of the Enterprise’s stability capital buffer

• Replace the prudential floor of 10% on the risk weight assigned to any retained CRT exposure with a prudential floor of 5% on the risk weight assigned to any retained CRT exposure

• Remove the requirement that an Enterprise must apply an overall effectiveness adjustment to its retained CRT exposures

Former FHFA Director Mark Calabria forced Fannie and Freddie to hold hundreds of billions of dollars to protect them against losses. The housing industry criticized the regulations, arguing they were excessive and would lead to higher mortgage costs.