True Stories: Hybrid, eNote and RON Implementation

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Spruce’s Patrick Burns on innovation in title technology

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Top CFPB official “hates” QM rules, jeopardizing safe harbor

A top CFPB official in charge of the rule-making process has heavily criticized the agency's own qualifying mortgage rule, jeopardizing safe harbor.

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Mortgage

FHFA issuing new rules on allowing Fannie Mae, Freddie Mac to rebuild capital

Plans to re-propose Enterprise Capital Rule in 2020

In 2018, the Federal Housing Finance Agency proposed a rule to implement new capital requirements for Fannie Mae and Freddie Mac.

While the move made headlines, at the time, the plan was viewed as nothing more than a thought exercise because under the rule, those capital requirements would have only gone into effect when the companies exited conservatorship.

And under the leadership of then-FHFA Director Mel Watt, the GSEs exiting conservatorship seemed like a pipe dream due to Watt’s view that it was Congress’ duty to act on housing finance reform and Congress’ inability to agree on much of anything.

But a lot has changed since then. Watt was replaced by Mark Calabria, who immediately began moving towards ending conservatorship, a process that is now in full swing.

As such, the FHFA now plans to do away with the 2018 capital rule and propose new capital rules next year.

The FHFA announced Tuesday that it plans to re-propose the “entire regulation” on capital requirements for Fannie Mae and Freddie Mac at an unspecified date in 2020.

The move comes just over a month after the Department of the Treasury and the FHFA announced that they now allow the GSEs to retain up to $45 billion in combined capital as they prepare to leave conservatorship.

Under the agreement between the GSEs, the Treasury and the FHFA, Fannie Mae can now hold a capital reserve of $25 billion, while Freddie Mac can hold $20 billion.

But those moves are meant to protect the GSEs and the taxpayers as the companies move towards exiting conservatorship, a process that will likely take several years.

“The enterprises are leveraged nearly 1,000-to-one, ensuring they would fail during an economic downturn – exposing taxpayers once again,” Calabria said at the time.

Now, the FHFA is moving to establish guidelines for how the GSEs should safely conduct their business in the future.

In a statement, Calabria acknowledges that the 2018 capital rule was enacted “under a different set of assumptions” about the future of the GSEs, but with the GSEs on a different path now, the FHFA believes new capital rules are necessary.

“The 2018 Capital Rule was proposed before FHFA began the process of retaining capital at the enterprises as a first step toward ending the conservatorships,” Calabria said in a statement. “In fairness to all interested parties, the comments submitted during the previous rulemaking were submitted under a different set of assumptions about the future of the enterprises.”

“During the process of the rulemaking, important issues were identified that will be addressed in the re-proposal,” Calabria continued.

“The Capital Rule is one of the most important rules I will issue as Director. This rule will be re-proposed and finalized within a timeline fully consistent with ending the conservatorships,” Calabria said. “Requiring the enterprises to build capital that can properly support their risk ensures that taxpayers will never be on the hook again during an economic downturn.”

According to the FHFA, the new rule will be proposed “sometime in 2020.”

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