Federal Housing Finance Agency Director Mark Calabria recently issued a formal directive to end guarantee fee discounts for high-volume lenders from Fannie Mae and Freddie Mac.
The FHFA explained that it is attempting to "level the playing field" for smaller lenders, and is making this a priority in housing finance reform.
“We trying to make sure Fannie and Freddie aren’t driving consolidation in the market, but instead they’re providing a level playing field, and that’s really something we’re focused on,” Calabria said Monday at a National Association of Federally Insured Credit Unions conference.
FHFA Director Calabria discusses leveling the playing field for smaller lenders and priorities for housing finance reform @ACUMACommunity #ACUMA2019 pic.twitter.com/lbxbvEBbfV
— FHFA (@FHFA) September 23, 2019
The FHFA explained that since the housing crisis in 2008, the agency has worked to maintain a level playing field for small- to mid-sized financial institutions.
“One of the things that really concerned me before the crisis was that it wasn’t unusual where the big guys like Countrywide would come in and they pay G-fees down here and you come in and pay G-fees up here,” Calabria said, referring to smaller lenders paying higher G-fees than larger lenders at certain points in the past.
But now, the director issued a formal directive to end volume discounts, which will be monitored by regular compliance reporting.
“To that end, FHFA, as conservator, has communicated to Fannie Mae and Freddie Mac that they will not provide volume discounts to larger market players,” an FHFA spokesperson told HousingWire. “Further, the instructions state that FHFA will monitor the enterprises’ compliance through regular reporting. This communication formalizes previous guidance set out in the Enterprises’ 2012 Conservatorship Scorecard.”
And the FHFA plans to ensure this level playing field is kept even after Fannie and Freddie are released from conservatorship. In its recent Housing Finance Reform plan, the Department of the Treasury recommended that volume-based pricing discounts or similar incentives should be prohibited.
“FHFA’s approach is based on this principle: same rate of return for the same risks regardless of size,” the FHFA spokesperson continued. “This supports equitable access for small lenders while appropriately allowing for guarantee fees to reflect the differences that may exist in the risk profiles among lenders of different size.”