FHFA delays implementing new products rule (sort of)

New date is April 28

The Federal Housing Finance Agency (FHFA) has delayed implementing a rule that would have required Fannie Mae and Freddie Mac to obtain approval from the regulator before implementing new products or services.

The rule, issued on Dec. 20, was previously slated to go into effect on Monday, Feb. 27, but has been postponed to April 28, the FHFA said Friday morning. Delaying implementation will give Fannie Mae and Freddie Mac the time needed to comply with the rule’s requirements, the agency said.

It’s not much a reprieve, though. In its official notice in the Federal Register, the FHFA said that “in the interim, FHFA will require the Enterprises to delay commencement of any activities that satisfy the new activity criteria until those activities can be reviewed by FHFA in accordance with the final rule.”

When the rule was first announced, FHFA Director Sandra Thompson said the edict clarifies how the FHFA will conduct assessments of new activities and products proposed by Fannie Mae and Freddie Mac.

“Enterprise activities can have significant effects on the mortgage market, consumers, and industry stakeholders, and today’s rule further refines FHFA’s process to ensure activities continue to serve the Enterprises’ mission while maintaining high standards of safety and soundness,” she said in a statement.

The FHFA defined new activity as:

1) An activity (meaning—a business line, business practice, offering or service that the Enterprise provides to the market either on a standalone basis or as part of a business line, business practice, offering or service);
2) An enhancement, alteration, or modification to an activity that is described by one or more of the following criteria: Requires a new resource, type of data, process, infrastructure, policy, or modification to an existing policy; Expands the scope or increases the level of credit risk, market risk, or operational risk to the Enterprise; or Involves a new category of borrower, investor, counterparty, or collateral;
3) A pilot or modification to the duration or volume of a pilot;
4) An activity that results from a pilot

The GSEs recently reported their fourth quarter performance, with both predictably faltering from the year prior. Fannie Mae recorded $1.4 billion in net income in Q4, down from $2.4 billion in Q3 and $5.2 billion a year earlier. In an ice-cold housing market, Fannie Mae also boosted its provision for losses for the third consecutive quarter. In all, Fannie Mae recorded $12.9 billion in net income in 2022, down from $22.1 billion in 2021.

Freddie Mac on Wednesday disclosed net income of $1.76 billion in the fourth quarter. That figure was a sequential gain on the $1.3 billion in net income recorded in the third quarter of 2022, but was a 36% decline from a year prior. Both GSEs reported being undercapitalized — Freddie Mac by $140.2 billion and Fannie Mae by $258 billion.

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