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With Biden win likely, FHFA doubles down on ending GSE conservatorship

Agency reaffirms commitment to its strategic goals

The Federal Housing Finance Agency will continue its mission to release the GSEs Fannie Mae and Freddie Mac from conservatorship, even under a Biden presidency, a spokesperson from the FHFA told HousingWire Thursday.

With four states still counting ballots, the race to 270 electoral votes is still on for former Vice President Joe Biden and President Donald Trump. As of Wednesday morning, Biden held 264 to Trump’s 214 electoral votes, with Nevada, Pennsylvania, North Carolina and Georgia still uncalled by the Associated Press. But with several of those states nearing the end of their counting, Biden’s path to victory has strengthened according to several media outlets.

HousingWire has outlined what either a Trump win or a Biden win would mean for housing, but one of the big questions that remains is what would happen to the plan for the GSEs to exit conservatorship?

For FHFA Director Mark Calabria, his mission remains clear: remove the government sponsored enterprises from conservatorship, a mission that his agency says will continue even with a potential change of presidency.

“Since Director Calabria began his tenure in April 2019, FHFA has worked as quickly as possible to fulfill our statutory mandate of responsibly ending the Enterprises’ conservatorships,” a spokesperson from the FHFA told HousingWire. “As an independent agency, FHFA will continue this work by following the milestones laid out in our recently finalized Strategic Plan, while working with the Enterprises to ensure they are meeting all the goals laid out in their Scorecard and Strategic Plan.”

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There has been much speculation that Calabria’s job could be at risk after the recent ruling in Seila Law vs. the Consumer Financial Protection Bureau, which established that the CFPB director serves at the pleasure of the president, not as an independent regulator appointed to a five-year term who could only be removed “for cause,” meaning negligence or criminal activity.

The decision is seen as establishing a precedent that could also impact the FHFA, which is set up in a similar way and has a challenge pending in court related to its structure.

The Selia ruling mentioned the FHFA’s structure as an example as a single-director rule, but cited its differences from the CFPB. The ruling did, however, note the controversial nature of even the FHFA’s leadership.

“The only remaining example is the Federal Housing Finance Agency (FHFA), created in 2008 to assume responsibility for Fannie Mae and Freddie Mac,” the ruling states. “That agency is essentially a companion of the CFPB, established in response to the same financial crisis. See Housing and Economic Recovery Act of 2008, 122 Stat. 2654. It regulates primarily Government-sponsored enterprises, not purely private actors. And its single-Director structure is a source of ongoing controversy. Indeed, it was recently held unconstitutional by the Fifth Circuit, sitting en banc. See Collins v. Mnuchin, 938 F. 3d 553, 587–588 (2019).”

However, as things stand now, Calabria is removable only for cause and is independent of any particular administration. As such, he is free to complete his term, which expires in 2024. And he intends to use that time to finish removing the GSEs from conservatorship.

In a 2019 interview with Bloomberg, a newly elected Calabria stated that Fannie Mae and Freddie Mac could be freed from government control even if Congress doesn’t pass a housing-finance overhaul. Calabria said lawmakers would get “more than sufficient time” to come up with a plan of their own.

Previously, at a housing policy conference in Washington, Calabria said he expected the FHFA will have a rule dictating capital requirements in place before Fannie and Freddie can go to market. One option the FHFA was considering is a period where the GSEs technically exit conservatorship but aren’t completely free of government oversight.

“If all goes well, 2021, 2022 we will see very large public offerings from these companies,” Calabria said. “The consent decree will be able to give that window where they can go to market, do an offering and still operate under a way where we’ve got some prudential safeguards.”

Fannie and Freddie could be looking at exiting government control by 2022 or 2023, according to Calabria.

And Calabria told members of the Credit Union National Association earlier this year that he expects the offering of stock in Fannie and Freddie to take place in 2021. The IPO is projected to be the largest public share offering in U.S. history. Analysts have valued the offering between $150 billion and $200 billion.

But legislation is also a way Calabria’s plans for the GSEs could be thwarted. While Biden may be close to winning the presidency, the Republicans look like they have retained control of the Senate, while the House is still under Democrat leadership.

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