Karen Petrou: Home Loan Banks Meet a Moral Hazard speed Bump
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7
10, 2024
3
10, 2024
FedFin on: FHLB Advance Availability
The FHFA has issued an advisory bulletin (AB) building on its 2023 over-arching plan for FHLB reform and bank-regulatory efforts to clarify and constrain FHLB lending to troubled IDIs which received considerable “lender-of-second-resort” FHLB funding during the 2023 crisis. FHFA says that this bulletin does nothing more than “memorialize” longstanding FHFA standards; in fact, it makes significant changes and is likely to require at least some Home Loan Banks to improve member-related credit-risk management by no longer solely counting on collateral and contacting an IDI’s primary regulator, the FDIC, or a Reserve Bank to confirm that ….
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2
07, 2024
FedFin: Taking Trump Still More Seriously
In the wake of last week’s debate, clients have asked that we advise about what a second Trump term might mean for U.S. mortgage finance. We reviewed our forecast at the start of this year on exactly this point. Much of it remains as before, but there are several areas where an update is warranted due to recent Trump fiscal- and monetary-policy trial balloons. Our updated, complete forecast follows….
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5
06, 2024
FedFin on: Closing In on Closing Costs
As anticipated, the CFPB has advanced its campaign to quell mortgage closing costs. But, unlike our forecast, the usually-aggressive agency is sliding into this debate with only a request for information (RFI) asking lots of questions we though the CFPB had already answered to its own satisfaction given a prior study and much ancillary “junk fee” commentary from Director Chopra and even the White House NEC Director.
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30
04, 2024
FedFin on: Public-Interest Regulation
In conjunction with releasing its new fair-housing rule, FHFA yesterday also created a new office of “Public Interest Examination.” In short, Fannie, Freddie, and the Home Loan Banks are henceforth – at least for the tenure of this President and FHFA director – to be held to standards that cement their role as public utilities, not privately-owned enterprises. This is neither unexpected nor unjustified – after all, the regulated entities enjoy manifold taxpayer benefits and two are in conservatorship. Still, it continues to make it even harder to turn the clock back on Fannie and Freddie or to return the Home Loan Banks to the quiet corners in which they and members enjoyed so many advantages.
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12
03, 2024
FedFin on: FHLBs Forced Into an Unflattering Limelight
The President’s FY25 budget picks up FHFA’s recommendations, calling for statutory change to double the System’s affordable-housing commitment. That won’t happen anytime soon, but a new CBO report strengthens FHFA’s hand in several areas well within its jurisdiction.
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8
11, 2023
FedFin on: Rebirth at 91
Although FHFA calls its FHLB report a centenary event ahead of the System’s 2032 birthday, the agency clearly plans structural substantive reform well before that milestone. Much of what’s planned will crimp FHLB profitability, increasing the importance of what would otherwise seem like tidying-up operational improvements to protect the viability of the System’s weaker Banks. With its eye on keeping the System in line, FHFA does not even suggest it should be allowed by law or regulatory sleight-of-hand to issue MBS or …
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31
10, 2023
FedFin Assessment: New White House AI Policy Promises New KYC Requirements, Banking-Agency Guidance
In this report, we assess the detailed executive order (EO) issued late Monday afternoon after days of private showings of selected versions. Much in the EO’s binding provisions address near-term AI-related threats to national-security, pandemic-risk, and infrastructure vulnerabilities and much related to AI-related opportunities derive from internal procedures Mr. Biden urges the federal government to develop along with workforce protections and biomedical research. The EO also reiterates the Administration’s values and presses agencies to work still harder on voluntary industry standards that many have been drafting or disagreeing on since the White House and Congress first called attention to AI risk. What comes of these provisions in the EO remains to be seen, but the Administration has also used tools such as the Defense Production Act’s authorization for direct economic intervention to mandate an array of new AI commercial and technology safeguards.
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27
04, 2023
FedFin on: How To Say It’s Systemic
FSOC’s newly-proposed analytical methodology for systemic risk identification is most immediately important for nonbank mortgage companies and the regulated institutions that love them. It may look as if a U.S. systemic framework is months away, but FSOC has signaled that, in some cases, systemic interventions could well come sooner.
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20
03, 2023
FedFin Analysis: Possible Cures for a Viral Run
Among the most vexing issues in the wake of SVB’s failure is the extent to which social media may have led to the first “viral run,” a run akin to the meme-stock volatility that lead the SEC and others to fear a new form of “flash-crash” risk. In this report, we assess current policy options related to deposit runs resulting from social media, an issue cited frequently by HFSC Chairman McHenry (R-NC) as a top priority as he begins work on post-SVB financial standards. We note some remedies – e.g., a ban on deposit-related communication were they permissible under various constitutional and statutory free-speech edicts.
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