The Federal Housing Finance Agency (FHFA), which oversees the bulk of the mortgage market, now has a U.S. Senate-confirmed director: Sandra Thompson.
The Senate today confirmed Thompson’s nomination to head the FHFA by a 49 to 46 vote. Thompson, a longtime regulator, has been leading the agency on a temporary basis for nearly a year. Before Biden appointed her acting director of FHFA in June 2021, Thompson led the housing mission and goals division. She previously was the supervision chief at the Federal Deposit Insurance Corporation.
Biden nominated Thompson for the permanent job in December, after she had already been on the job for nearly six months, putting to rest rumors of an alternative candidate.
In a statement, Thompson said she was honored to be nominated by Biden and confirmed by the Senate. “I appreciate the support I received, and I look forward to continuing to work with Congress and other stakeholders as I fulfill my new role,” she said.
During her time as head of FHFA, Thompson has taken a different approach than her predecessor, Mark Calabria, who often was at odds with the mortgage industry. Within weeks, Thompson reversed an unpopular adverse market fee on most refinances.
Thompson also has taken a number of actions to address the racial homeownership gap and fulfill the government sponsored enterprises’ statutory duty to serve underserved mortgage markets.
In August 2021, the FHFA entered into a fair lending data sharing agreement with the Department of Housing and Urban Development and made on-time rental payment history a part of Fannie Mae’s underwriting process. The FHFA also set new affordability goals for Fannie Mae and Freddie Mac, establishing target loan purchases in minority and low-income Census tracts.
But along with measures to promote affordability — which is not always aligned with business interests — Thompson’s FHFA also made changes that industry stakeholders cheered. In September 2021, the U.S. Treasury and the FHFA agreed to suspend GSE caps for higher-risk loans, and loans on investor and second homes.
In January, FHFA raised fees on high-balance and loans for second homes. Mortgage industry stakeholders saw the fees as the first step of a holistic review of GSE loan-level pricing, which Thompson has said is on her list of priorities. Affordable housing advocates have argued for using revenue from high-balance and investor loans to subsidize more affordable lending.
The cuts to fees on affordable loans have not yet materialized. The Mortgage Bankers Association has since argued that the fees on high-balance loans and second home loans may deter lenders from making those loans.
The FHFA rejected the first draft of Fannie Mae and Freddie Mac’s plans to serve the manufactured housing and rural markets and preserve affordable housing.
That, and other actions from Thompson, led David Stevens, a former Federal Housing Administration commissioner, to opine Thompson “has a legacy in mind.” He believes it may be harnessing the GSEs’ resources to better serve first-time homebuyers and borrowers of color.
That will be more difficult for the GSEs, however, if HUD reduces the FHA mortgage insurance premiums, as many expect it will. Lowering the premiums would make FHA financing more attractive for mission borrowers, and by comparison, risk-based GSE loan pricing less attractive.
“The [GSEs] may not be competing with FHA, but they have to at least acknowledge that they have to work harder to not lose too much ground to them, or they will come under scrutiny from Congress and others,” Stevens said.
But Thompson also has made clear equitable access to affordable and sustainable housing must not come at the expense of safety and soundness. Industry stakeholders, including the MBA, have welcomed that approach.
The CEOs of both Fannie Mae and Freddie Mac also expressed support for their newly confirmed boss.
Fannie Mae interim CEO Dave Benson said the GSE has a strong and collaborative relationship with its conservator. “We look forward to building on this relationship under the leadership of Director Thompson with a continued focus on our mission to advance equitable and sustainable access to homeownership and quality affordable rental housing across America,” Benson said.
Freddie Mac CEO Michael DeVito also congratulated Thompson on her confirmation. “We applaud her commitment to our mission and look forward to continuing our very collaborative working relationship,” DeVito said.
On Wednesday, Bob Broeksmit, CEO of the MBA, praised Thompson’s ability to balance safety and soundness with issues of equity.
Thompson “has repeatedly demonstrated leadership, expertise, and a strong commitment to sound risk management principles while safely expanding access to mortgage credit and creating equitable and sustainable housing solutions for homeowners and renters,” Broeksmit said.
Some mortgage industry insiders expect some more controversial policy moves from the FHFA after the conclusion of the confirmation process, which has become more difficult in recent years.
There are a number of matters before the FHFA, including a conclusion to its years-long process to determine whether the GSEs can use alternative credit scoring models and whether the GSEs can sustainably back loans made on deeply affordable manufactured housing.
The FHFA also has not yet released the equitable housing finance plans that it required the GSEs to submit by the end of 2021.