The Federal Housing Finance Agency (FHFA) announced on Monday it issued a request for input (RFI) regarding government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac’s single-family pricing framework. The goal is to gather public feedback on the “goals and policy priorities that FHFA should pursue in its oversight of the pricing framework,” the agency said.
The FHFA is also seeking input on the GSEs’ single-family upfront guarantee fees and whether it is appropriate to continue linking those fees to the Enterprise Regulatory Capital Framework (ERCF).
The ERCF was established in 2020 and “has a significant impact on the risk-based pricing component of the Enterprises’ guarantee fees,” the FHFA said. The FHFA began using the ERCF to measure the profitability of new mortgage acquisitions in 2022.
FHFA Director Sandra Thompson said the move is being made to increase transparency.
“Through this RFI, FHFA seeks input on how to ensure the pricing framework adequately protects the Enterprises and taxpayers against potential future losses, supports affordable, sustainable housing and first-time homebuyers, and fosters liquidity in the secondary mortgage market,” Thompson said in a statement. “We are committed to being transparent and to considering views from a diverse set of stakeholders and market participants.”
In its 2022 and 2023 Conservatorship Scorecards, the FHFA — which regulates Fannie and Freddie — directed the GSEs to update the pricing framework to “increase support for core mission borrowers, while ensuring a level playing field for small and large sellers, fostering capital accumulation, and achieving viable returns on capital,” according to the RFI.
This led to an update to the single-family pricing framework the agency initiated in January. Guarantee fees are used to cover the administrative costs, expected credit losses, and “cost of capital associated with guaranteeing securities backed by single-family mortgage loans,” according to the FHFA.
Last week, the Mortgage Bankers Association (MBA) submitted comments to the FHFA in response to a notice of proposed rulemaking that would amend certain parts of the ERCF, including “provisions of the ERCF related to guarantees on commingled securities, multifamily mortgage exposures secured by properties with government subsidies, derivatives and cleared transactions, and credit scores,” the MBA said in an announcement.
The MBA described itself as “generally supportive” of most amendments in the proposal, but noted concern regarding the proposal’s “changes to representative credit score calculations.” It urged the FHFA to consider “reducing the risk surcharge on third-party originated loans and the inclusion of a multifamily countercyclical adjustment.”
Comments on this RFI may be submitted through the FHFA website or by mail through August 14, 2023.