Continuing her very different vision of Fannie and Freddie, FHFA Acting Director Thompson today has released a new strategic plan for the agency emphasizing the importance of both equitable and sustainable housing finance.
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As noted in our in-depth analysis of Acting FHFA Director Thompson’s confirmation hearing, it’s clear that Democrats and Republicans are thinking hard about resurrecting statutory changes to the GSEs’ charters. They are, though, about as far apart as usual on the constructs they prefer, ….
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At today’s confirmation hearing, Gov. Brainard took a lot of the heat on inflation Republicans only mildly mentioned during Mr. Powell’s Tuesday confirmation hearing (see Client Report FEDERALRESERVE67). As we anticipated (see Client Report FEDERALRESERVE66) this reflects the fact that the GOP is united in opposition to her appointment as Fed vice chair; should she hold Sen. Manchin (D-WV) she will be confirmed; if not, perhaps not. Ranking Member Toomey (R-PA) also used the occasion to signal – again unsurprisingly – GOP opposition should Sarah Bloom Raskin be nominated….
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As noted on Thursday, FHFA continues to tread carefully through the big-bank rulebook, adopting standards said to be like-kind that aren’t quite so similar when it comes to critical details. The latest proposal demands capital planning in a construct akin to the one Democrats favored as the agencies finalized the big-bank stress capital buffer (SCB) minus express restrictions on capital distributions. Although the SCB will make Fannie and Freddie more resilient, it also steepens the climb out of conservatorship unless some new capital comes along.
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On Tuesday, HUD and the CFPB opened the door to special-purpose mortgage finance. Now, we expect FHFA to use this safe harbor to mandate express GSE equitable-finance programs and for banks to take much of what’s left in all their commitments after George Floyd’s murder and turn it into mortgage and other community-finance products.
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On Tuesday, HUD and the CFPB opened the door to special-purpose mortgage finance. Now, we expect FHFA to use this safe harbor to mandate express GSE equitable-finance programs and for banks to take much of what’s left in all their commitments after George Floyd’s murder and turn it into mortgage and other community-finance products.
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Two recent studies add fuel to the fire we first spotted late last year: demands for ARMs that only go down. Director Thompson’s latest scorecard combines with her equitable-finance mission to make this option a top political priority even if its market feasibility remains at best uncertain.
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Unsurprisingly, FHFA today raised the GSEs’ conforming loan limit to about $647,000 and the high-cost limit to nearly $1 million. More surprisingly, FHFA Director Thompson accompanied this politically-sensitive announcement with a statement that her agency is “actively evaluating the limit and its relationship to affordable housing across the U.S.”
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Although the majority of FHA ARMs are now LIBOR-linked, HUD has been waiting for Congress, the Fed, or forces on high to help it set a new benchmark. Although deliverance may come, HUD has now taken the belated step of tentatively starting its own replacement-benchmark exercise. What it does how for whom will of course drive not just all FHA loans, but also the market as a whole.
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