FHFA to ‘re-examine’ role of federal mortgage banks: Thompson

WASHINGTON — The head of the Federal Housing Finance Agency said the agency would “re-examine” the structure and role of federal mortgage lending banks in the U.S. housing market, possible first steps in long-sought reform.

Testifying at a House Financial Services Committee oversight hearing, FHFA Director Sandra L. Thompson told lawmakers in her opening remarks that the agency would soon begin a formal review of the federal system. home loans. Government-sponsored companies, established in the 1930s, have come under intense scrutiny primary activity in the housing market has declined in a context of historical levels of liquidity in the banking system.

Sandra Thompson, director of the Federal Housing Finance Agency, told lawmakers that the FHFA would conduct a thorough review of the role and organization of the Federal Home Loan Bank System.

Bloomberg News

“As we approach the 100th anniversary of ‘home lending banks,’ the time has come to re-examine their approach to ensure they continue to meet the needs of today and tomorrow,” Thompson said. “We plan to engage a variety of stakeholders in the coming months as we complete this review and, of course, we welcome input from members of Congress.”

In his written testimony, Thompson said the FHFA would “perform a 90-year look back, as well as a forward looking analysis of the” home lending system. She also said the agency would hold “public listening sessions across the country” and “examine everything from the banks’ membership base, operational efficiency and effectiveness, to more fundamental questions about mission, purpose and organization.”

Thompson was warmly welcomed by Democrats on the House Financial Services Committee in her first appearance since being confirmed by the Senate in her role earlier this year. Committee chair Maxine Waters of California said the Biden appointee had “taken critical steps to put the FHFA on a new path” by eliminating policies introduced under the Trump administration that “made it more costly for families to buy or refinance their homes.

Thompson’s Trump-era predecessor, former FHFA director Mark Calabria, was brought up several times during Wednesday’s hearing. Republicans have expressed support for policies introduced by Calabria before it was ousted by the Biden administrationwhile Democrats lambasted his tenure and argued that his policies made homeownership harder to achieve for some Americans.

Ranking member Patrick McHenry, the North Carolina Republican, criticized Thompson for undo Calabria changes FHFA’s capital adequacy framework, which had introduced bank-type capital requirements for government-sponsored companies Fannie Mae and Freddie Mac.

“Instead of working to maintain stability, the FHFA has weakened our housing finance system by reducing taxpayer protections and pushing risky new programs,” McHenry said. “For example, the agency repealed the capital and liquidity rule designed to ensure GSEs could weather an economic downturn. We are concerned about this.

McHenry’s remarks echoed concerns he raised earlier in July in a letter co-signed by fellow Republican French Hill of Arkansas. Both lawmakers urged Thompson to ensure that FHFA government-sponsored businesses not expanding into new areas of finance.

Thompson, formerly a regulator at the Federal Deposit Insurance Corp., said changes to capital requirements made by the FHFA under his leadership would “protect taxpayers while requiring companies to hold substantial capital.”

“FHFA will continue to promote sustainable and equitable access to credit in a responsible manner that does not compromise safety and soundness,” Thompson said in his written testimony.

Several Republicans have asked about the FHFA’s progress toward releasing Fannie Mae and Freddie Mac from conservatorship. At one point, Thompson said that while FHFA’s combined capital goal between Fannie and Freddie was around $300 billion under the current framework, other factors would also play into whether and when GSEs would be placed under private control.

Asked by Missouri Rep. Blaine Luetkemeyer if meeting the $300 billion threshold would be enough to free the GSEs from conservatorship, Thompson said there are “other factors that need to be considered,” including including a review of the political risks associated with institutions that have significant exposure to Fannie and Freddie shares.

Thompson also suggested during Wednesday’s hearing that the FHFA would welcome an extension of its authority to directly oversee third-party service providers for GSEs. Asked by Democratic Rep. Bill Foster of Illinois whether that authority would support the agency’s mission, Thompson said the FHFA has been asking for such powers “for several years,” noting that federal banking regulators already have authority. important on third parties. suppliers.

“In fact, when I came to the FHFA from the FDIC, I was very surprised that we didn’t have that authority,” Thompson said. “The services that are provided to our regulated entities are really important; they could impact the safety and soundness of our regulated entities.

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