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The government-sponsored enterprises (GSEs) Fannie Mae (FNM) and Freddie Mac (FRE) this week issued a joint letter to their conservator, the Federal Housing Finance Agency (FHFA), calling for an "appropriately tailored" version on a new review rule. The Housing and Economic Recovery Act of 2008 (HERA) imposes certain new processes including a requirement that the GSEs obtain the FHFA director's approval for any new product. The FHFA in July issued an interim rule that would enforce this requirement and requested public comment on the rule. The GSEs' letter (available to download here) arrived Monday in response to that request. At the core of the discussion is the difference between new products and new activities. New products must be submitted for FHFA approval -- which includes a significant amount of documentation -- while new activities only need a review to determine whether they are considered new products and subject to approval. "However, the interim rule collapses these distinct processes into one, requiring the same amount of information in a new activity notice as in a new product approval request" the GSEs' letter reads, in part. "This process collects more information than is necessary for a new activity review and effectively eliminates the expedited review of new activities." The interim rule therefore does not allow the GSEs to promptly respond to changing market conditions by quickly implementing new activities, according to comments submitted Monday by the National Association of Home Builders. The approval process is "cumbersome," and the volume of information required for submission under the interim rule may constrain innovation and the GSEs' ability to respond promptly to market demands, NAHB said. The GSEs as a result suggested tailoring the scope of the interim rule "to implement the statutory requirements in a manner that meets congressional intent and recognizes the close association that the Enterprises have with FHFA, particularly during the conservatorship." Write to Diana Golobay.

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