Mortgage rates, loan limits and forbearance

We cover the increase in conforming loan limits for Fannie and Freddie and what forbearance numbers and record-low rates could mean for the housing market.

Untying business growth from the housing market cycle

Lenders need business growth that is not linear and is not tied to the market cycles – leveraging automation technology can help.

The practical use of AI for LOs

The combination of tightly-packed schedules and intensive oversight means augmenting loan officer’s efforts with intelligent systems is more relevant than ever.

HousingWire's 2020 Tech Trendsetters

This year’s list of Tech Trendsetters certainly earned their status as the industry was met with incredible challenges and new opportunities.

MortgagePolitics & Money

FHFA’s Strategic Plan prepares Fannie and Freddie to leave conservatorship

GSEs lack the capital to withstand a serious housing downturn, FHFA says

The Federal Housing Finance Agency (FHFA) released its strategic plan for fiscal years 2021 – 2024 on Tuesday, which aimed to establish new goals for its sanctioned duties, including a responsible ending to the conservatorship of Fannie Mae and Freddie Mac.

Though no timeline has been established, a statement by FHFA director Mark Calabria outlined the steps the agency is taking toward achieving its three main goals:

  • Ensuring safe and sound regulated entities through world-class supervision
  • Fostering competitive, liquid, efficient and resilient (CLEAR) national housing finance markets
  • Positioning the Agency as a model of operational excellence by strengthening the workforce and infrastructure.

FHFA’s strategic plan was built upon two other documents released in Oct. 2019: the 2019 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac and the 2020 Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Solutions that directed the Enterprises to prepare for the end of conservatorship.

“FHFA must take steps to prepare for its post-conservatorship role as a world-class regulator. This new Strategic Plan outlines the critical milestones that will guide FHFA’s efforts to ensure that its supervision and regulation of the Enterprises is strong and well-executed once outside the framework of conservatorship,” said FHFA director Mark Calabria.

To do so, the organization’s plan of action includes a roadmap, a resolution framework for the Enterprises, a strategy for CSS and providing FHFA stakeholders with accounting and auditing experience for post-conservatorship scenarios. When those will be released and what they will look like is yet to be determined.


NAMB leads brokers in advocating for consumer data privacy

The National Association of Mortgage Brokers has been advocating for mortgage brokers for almost 50 years. We spoke with NAMB’s President and NAMB’s lobbyist about the organization’s past and current legislative efforts.

Presented by: NAMB

However, some steps have already been put into motion to strengthen the FHFA, Calabria said, like the establishment of the Office of Equal Opportunity and Fairness in January 2020, which he noted serves a critical role in “cultivating a high-performing, diverse, accountable, and engaged workforce.” The agency also created the Division of Accounting and Financial Standards and the Division of Research and Statistics to provide the public with analysis on housing.

Though a new blueprint may be in the works, the FHFA said economic risk is still plausible.

“As we have seen with the outbreak of COVID-19, a global pandemic can cause a liquidity crisis, lead to simultaneous consumer demand and business supply shocks, and cast uncertainty over the near-term trajectory of labor and housing markets,” the report said.

After injections of liquidity by the Federal Reserve and under the CARES Act, the FHLBanks’ balance sheets – both advances and debt outstanding – fell to or below pre-crisis levels, the report said. However, the FHFA said the Enterprises lack the capital to withstand a serious housing downturn. According to the report, after Q2 2020, the Enterprises owned or guaranteed approximately $6 trillion in single-family and multifamily mortgages, nearly half of all mortgage debt outstanding in the United States. Yet their combined leverage ratio was over 200 to 1.

“By contrast, the largest financial institutions in the nation have an average leverage ratio of approximately 12 to 1. Such high leverage, over the long term, would hinder FHFA’s ability to achieve the objective under Strategic Goal 2 that calls for ensuring the regulated entities ‘appropriately respond to market events and downturns,’” the report said.

Within the outline of the 2019 conservatorship strategic plan, the FHFA established that ending the conservatorships requires restoring the Enterprises to fully privately owned entities capable of operating in safe and sound financial condition.

Though the pandemic caused some initial disturbance, that financial condition may be on the come up. On Thursday, Fannie Mae reported a net income of $4.2 billion in the third quarter of 2020 – boosting its net worth to $20.7 billion as of Sept. 30. Freddie Mac pulled in its own $2.5 billion, pushing its total equity to $13.9 billion.

Beyond safety and soundness, the FHFA said the housing finance system remains in urgent need of reform and said that careless mortgage credit risk backed by insufficient capital in 2008’s financial crisis has yet to be resolved – an issue the FHFA said only Congress can dissolve.

To achieve the strategies laid out, the organization called for Congress to give FHFA the same flexibility as the federal banking regulators by amending or removing the statutory capital definitions so that the FHFA could simplify the proposed capital rule.

“The regulatory environment could also affect FHFA’s ability to achieve its strategic goals. FHFA does not currently possess the power to examine important counterparties of its regulated entities, such as nonbank servicers,” the report said. “In addition, FHFA will need to partner with other financial regulatory agencies to ensure a fair playing field and mitigate opportunities for regulatory arbitrage.”

Leave a comment

Most Popular Articles

The downside of the hot 2020 housing market: rapid home-price growth

The mismatch in the COVID deflationary impact toward the economy overall and the strength of the housing market due to demographics makes for a troubling formula for home-price growth, which we are seeing. The recent NAR existing home sales report showed 15.5% year-over-year growth in prices. HW+ Premium Content

Nov 30, 2020 By
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please