GSE reform

The Consumer Financial Protection Bureau plans to change the definition of what constitutes a qualified mortgage from a 43% debt-to-income limit to a price-based threshold, and further extend a temporary exemption given to Fannie Mae and Freddie Mac.

As they prepare to exit government conservatorship, Fannie Mae and Freddie Mac have enlisted the investment banks to help them boost capital and evaluate market opportunities.

The FHFA’s proposal is intended to strengthen Fannie Mae and Freddie Mac, but many experts warn that it could boost guarantee fees for lenders that they say may be passed on to borrowers.

Some observers wonder if proposed regulatory targets for Fannie Mae and Freddie Mac will stoke concerns about low shareholder returns. But others suggest those fears are unfounded.

The much-anticipated proposal, which would not go into effect until after Fannie Mae and Freddie Mac are privatized, reflects Director Mark Calabria’s aggressive efforts to get the companies on a strong financial footing.

Director Mark Calabria, who abandoned the Fannie and Freddie capital proposal written by his predecessor, said he expects a revised framework to be ready “very soon.”

The two mortgage giants said they would begin the process of hiring outside firms to help raise capital that will be needed to exit conservatorship.

Fannie Mae and Freddie Mac are now able to buy loans in forbearance to alleviate pressure on the sector, but the fees charged by the mortgage giants to assume more risk could turn away some originators.

Federal Housing Finance Agency Director Mark Calabria said a virus-induced financial crisis might give rise to more delinquencies and foreclosures than the 2007 subprime mortgage meltdown.

FHFA Director Mark Calabria said the health crisis will complicate the release of a proposal establishing new capital requirements for Fannie Mae and Freddie Mac.

Fannie Mae and Freddie Mac coming out of conservatorship and transitioning into public utilities would be the ideal for small mortgage lenders, according to trade-organization representative Robert Zimmer.

The Federal Housing Finance Agency authorized the government-sponsored enterprises to contribute $502.2 million to two funds that help preserve and build affordable housing.

Fannie Mae and Freddie Mac are expected to retain “limited and tailored government support” after they are released from U.S. control, Treasury Secretary Steven Mnuchin said in a letter to lawmakers.

Fannie Mae identified the adoption of hedge accounting and regular issuance of multifamily Connecticut Avenue Securities deals as among strategies it could continue to pursue while navigating regulatory uncertainties and change.

The unsuccessful scheme has become the focus of a legal battle involving two former Federal Home Loan Bank of San Francisco employees against that government-sponsored enterprise, which fired them in 2018.

Mortgage refinancings made up slightly under one-third of MGIC Investment Corp.'s new insurance written during the fourth quarter, contributing a significant percentage of its business.

The regulator said the investment bank and financial services company will help in the process of strengthening Fannie Mae and Freddie Mac’s capital standing for their eventual exit from conservatorship.

Trade associations representing mortgage lenders and securities market participants are asking the Federal Housing Finance Agency to rethink a plan to restrict pooling options for loans sold into uniform mortgage-backed securities.

The agency is sending a strong message that it won't rush to end an exemption for Fannie Mae and Freddie Mac while also signaling longer-term changes that will affect all lenders.

Director Kathy Kraninger has told lawmakers that the agency will delay the expiration of the so-called QM patch, now set for January 2021.