FHFA Sets Comment Deadline for Freddie Closed-End Loan Product
The Federal Register includes the FHFA’s comment request on a new Freddie Mac product that would
give borrowers access to their locked-up equity without a new first lien at a higher rate or a traditional homeequity second riding piggyback atop the first lien.
Housing Takes on Immediate Political Impact, Will Action Follow?
Although there was no need for further evidence that campaign season has begun, today’s Senate Banking housing hearing surely confirmed it. Chair Brown (D-OH) used his opening statement and virtually all of his questioning to focus on Ohio-specific issues; GOP senators argued forcefully that Biden Administration policies reduce housing supply and hike unaffordability. Sen. Brown talked about the need for legislation in several instances, but it remains to be seen if he plans near-term action on a specific proposal. Perhaps hoping for this, Sen. Cortez-Masto (D-NV) questioned FHFA Director Thompson about Home Loan Bank mission compliance, pressing colleagues to support a bill she introduced in the last Congress to double the System’s affordable-housing obligation and alter other aspects of their operations. Sandra Thompson announced that FHFA this year will issue proposals to address the Banks’ mission and “streamline” AHP activities – she did not say how – as well as sharply constrain insurance-company members with a new, ongoing requirement for mortgage-finance activities.
Totaling Title?
Bloomberg today reports that the CFPB may simply ban consumer payment for lender title insurance. Could it? In short, yes, but that won’t be easy, necessarily good for borrowers, or quick.
Heading Your Way?
Following FSOC’s fulminations about nonbank mortgage companies, FHFA in 2023 heightened its supervisory standards mandating GSE prudential governance of eligible seller servicers. A new OIG report likes most of this a lot, but wants structural improvements in how FHFA executes its obligations and ensures Fannie and Freddie do the same. A bit of this will brush off on other counterparties, most likely MIs.
Progressive Dems Keep Pressure on Powell
Ahead of today’s FOMC meeting, progressive Democrats again sent a letter to Chair Powell calling for an interest-rate reduction timeline on grounds that higher-for-longer adversely affects the public good. Signed by Sens. Warren (D-MA), Sanders (I-VT), and nineteen House Democrats, the letter calls the Fed’s monetary policy “excessively contractionary,” stressing its negative impacts on the housing market and financial stability.
HFSC GOP Takes on GSE Title-Insurance Pilot
Laying pipe before HFSC’s housing hearing tomorrow, Subcommittee Chairs Davidson (R-OH) and Huizenga (R-MI) along with Rep. Garbarino (R-NY) sent a letter to FHFA Director Thompson Friday sharply criticizing her for undue politicization given the President’s recent call for title-insurance reform. Th
HFSC GOP Takes on GSE Title-Insurance Pilot
Joining attacks against the Basel end-game rules, Republican CFTC Commissioner Mersinger today criticized the proposal for its impact on derivatives markets. It would, she said, disincentivize banks from offering client-clearing services to derivatives end-users, exacerbate the downward trend in the number of entities offering client clearing services, challenge the portability of customer positions, and increase systemic risk.
KC Fed Study: Vulnerable Crypto Users at Financial Risk
Buttressing calls for cryptoasset standards, the Kansas City Fed today published an article finding that crypto transactors are less financially literate and more risk tolerant compared to nonowners, stressing the importance of improved education regarding cryptoasset risks. C
HFSC GOP Goes after Climate-Risk Standards
HFSC’s majority staff memo on Thursday’s hearing indicates that the panel of top federal bank supervisors …
Hsu Says Opsrisk Not Cured by Capital, Liquidity
In remarks today on operational resilience, Acting Comptroller Hsu notes that operational risk is not “a problem that capital or liquidity can solve.” Karen Petrou has noted this most recently with regard to the operational-risk capital rules included in the current proposal, which are founded on the longstanding regulatory assumption that capital indeed buffers operational risk.
Senate Talk of Affordable Housing Turns to FHLB Role
At today’s Senate Banking Committee affordable-housing hearing, Chairman Brown (D-OH) again called for the Fed to cut interest rates to address the crisis. The hearing also touched on the role FHLBs can play, with Sen. Lummis (R-WY) stating her intentions to work with the system to expand its impact on the housing supply shortage.
CFPB to Proceed to Mortgage-Fee Rulemaking
NEC Director Brainard today said that the CFPB will pursue a rule or similar action to curtail mortgage-closing “junk” costs along the lines we identified following last week’s Bureau post in conjunction with the new White House competition strike force.
Senate Banking Turns to AI’s Impact on Housing Finance
Today’s lightly-attended Senate Banking Subcommittee hearing on AI and Housing focused principally on AI governance issues including accountability, model explainability, transparency, and bias. Sen. Warnock (D-GA) called for action on S. 3692, legislation to prohibit use of algorithmic systems to coordinate – and it is believed thus inflate – rental prices or reduce supply. Although Subcommittee Chairwoman Smith (D-MN) lauded AI for its potential to boost the housing supply, she and other Democrats raised serious concerns that AI reinforces biases in lending decisions.
Democrats Remain Dubious About the Capital Proposal
Today’s Financial Institutions Subcommittee hearing on the capital rules made it still more clear that more than a few Democrats share at least some GOP concerns. Chair Barr (R-KY) reiterated points he has frequently made about the poor analytics behind the proposal; Full Committee Ranking Member Waters (D-CA) and Rep. Green (D-TX) were unequivocal in their support. Other Democrats raised concerns many had previously expressed in comment letters, with Rep. Sherman (D-CA) pointing to problems with the proposal’s impact on capital markets and its lack of credit for private mortgage insurance and Rep. Beatty (D-OH) highlighting concerns with small business credit availability.
Would a Trump Victory Set the GSEs Free?
Common-stock investors clearly think so, but they’re a notably speculative lot and more than likely wrong. In this report, we lay out why we think the limbo in which the GSEs have languished since 2008 is now a permanent quasi-vegetative state.
We have reviewed the 2024 scorecards FHFA released for Fannie and Freddie. Unlike prior years, it contains no new initiatives or aspirations, largely holding Fannie and Freddie to account for much of what they’ve been asked to do before. Fannie is given indirect encouragement to continue its title-insurance plans, but that’s only if it comports with added cost-efficiency under several longstanding FHFA goals….
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Steady As They Go Scores
We have reviewed the 2024 scorecards FHFA released for Fannie and Freddie. Unlike prior years, it contains no new initiatives or aspirations, largely holding Fannie and Freddie to account for much of what they’ve been asked to do before. Fannie is given indirect encouragement to continue its title-insurance plans, but that’s only if it comports with added cost-efficiency under several longstanding FHFA goals. The directive regarding property insurance is only somewhat less elliptical, scoring the GSEs on the extent to which they develop property-insurance options that “mitigate risk while furthering sustainable homeownership” – whatever that may come to mean. Climate risk comes in for mention among goals telling the GSEs to “enhance” consumer understanding of climate risk and do their best to avoid it on their own via monitory and analysis that identify at-risk borrowers and “informs” policy. And, of course, the GSEs are to be safe and sound, transferring credit risk in large amounts to the greatest extent possible.
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