FHFA wants GSE pricing adjustments and counterparty review authority

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Fannie Mae and Freddie Macpricing frameworks may see changes to better serve “mission-primary borrowers,” according to the Federal Housing Finance Agency (FHFA).

The regulator has also, once again, argued for a power of scrutiny over entities doing business with government-sponsored companies.

In its annual report to Congress, the FHFA said it asked companies to “begin updating their pricing frameworks” in 2021. It has already made some price adjustments, after raising lending limits conforming to just under a million dollars, increasing the fees for some. high balance and second home loans.

These price changes, he said in the annual report, were just the first “incremental step” in updating the pricing frameworks. In October 2021, FHFA Director Sandra Thompson indicated that she was planning a “holistic review” of Fannie Mae and Freddie Mac’s guarantee fees and loan pricing.

The FHFA also provided updates to Congress on other aspects of its corporate oversight, including their boards and management. For Fannie Mae and Freddie Mac, “diversity, inclusion, and fair lending oversight require special attention,” he writes.

He also highlighted risks to Fannie Mae’s information technology systems, writing that it “is exposed to information security risks, presenting opportunities to strengthen governance and controls in the management associated risks”.

The report also touted the progress of the GSEs on the housing goals set by the FHFA. By March, GSEs had met all of their 2021 housing targets. Freddie Mac missed its low-income refinance target last year.

The regulator also took the opportunity to ask Congress to address certain issues beyond the current authority of the FHFA.

The FHFA has asked Congress to give it authority to review services provided to its regulated entities, a request it has included, in one form or another, in its annual report for several years. This year’s request, however, was much longer, raising the question of whether the agency now considers this a higher priority.

An FHFA spokesperson did not immediately return a request for comment.

“FHFA recommends that Congress authorize FHFA to review the records, operations, and facilities of each provider of material services to a regulated entity with respect to services provided to the regulated entity,” FHFA wrote.

“If Congress granted the FHFA such authority, giving the FHFA tailored parity with other federal financial regulators, the Agency would be in a better position to fulfill its legal obligation to ensure the safety and soundness operations of companies and FHLBanks.”

The FHFA also said the authority would allow it to coordinate with other federal regulators for reviews of third-party service providers, “increasing efficiency and reducing burden.”

The FHFA had indicated earlier in 2022 that it was considering asking Congress to expand its authority to oversee GSE counterparties, particularly non-bank services. Industry stakeholders have largely rejected this proposal.

The agency said in February, in its draft four-year strategic plan, that it had “no authority to review material counterparties of its regulated entities, such as non-banking services”, which it said could “interfere” with its “ability to provide safety and soundness to regulated entities. This language was not incorporated into the final version of the plan.

The prospect of FHFA oversight of non-bank mortgage services did not sit well with some industry players, including the Community Association of Home Lenderswho said at the time that the surveillance was “neither necessary nor justified”.

The Mortgage Bankers Association also challenged the FHFA’s expansion of review authority. The MBA written at the time FHFA’s GSE regulations should “not extend to broad review authority over all stakeholders and participants in the housing finance ecosystem, including corporate clients.”

Words about FHFA oversight of GSE counterparties also recently surfaced in a bill introduced in the House of Representatives in March.

The Cybersecurity Enhancement for the Financial Industry Act would give the FHFA the power to regulate the provision of services provided to government-sponsored businesses and federal mortgage lenders.

The title of the bill suggests that it is intended to give the FHFA oversight of technology service providers. But the wording of the bill only refers to service providers, which would include counterparties such as mortgage originators and servicers. The Housing Policy Councilwhich represents large non-bank originators, as well as managers and banks, wrote to the House Financial Services Committee for clarification.

“We are troubled by suggestions that the bill would give the FHFA the power to regulate and review all non-bank mortgage servicers, a view that is inconsistent with both our reading of the text and with the purpose of the Banking Companies Act on which this bill is based. wrote Ed DeMarco, chairman of the Housing Policy Council and former acting director of the FHFA.

The House Financial Services Committee advanced the invoiceunchanged, in May.