Written By: Joel Palmer, Op-Ed Writer
Midway through its 120-page annual Report to Congress, the Federal Housing Finance Agency dedicated one page to making three legislative recommendations. One of those recommendations drew a strong objection from the Mortgage Bankers Association (MBA).
The three legislative proposals in the report released earlier this month include:
Housing finance reform, due to the agency’s opinion that the conservatorship of Fannie Mae and Freddie Mac are “not sustainable.”
Removing barriers to investor participation in credit risk transfer transactions. “The credit risk transfer market is relatively new and evolving and relies on ongoing investor interest and ability to purchase the credit risk,” reads the report. Removing statutory impediments to participation in this market could “help to expand investor participation…”
Examination of regulated entity counterparties. The FHFA has requested authority to examine third parties that provide critical services supporting the secondary mortgage market, including nonbank mortgage servicers for Fannie Mae and Freddie Mac.
It’s the third recommendation that led to a statement of objections from MBA President and CEO David H. Stevens.
In his statement, Stevens said the organization supported the first two legislative recommendations put forth by FHFA.
"However, MBA vigorously objects to FHFA's request that Congress grant it examination authority over nonbank servicers. In its role as conservator, FHFA already has the ability to set GSE counterparty requirements on servicers and the CFPB's comprehensive mortgage servicing rules apply to all mortgage servicers. By statutory design, this is also an area of significant state authority and examination activity. Granting FHFA this additional authority absent preemption of duplicative state requirements would result in an even more burdensome regulatory regime in a space that has already seen spiraling costs due to regulatory duplication.”
In the Report to Congress, FHFA argued that while other federal regulators have statutory authority to examine companies that provide services to depository institutions through the Bank Service Company Act, it can only exercise oversight through contractual provisions. FHFA also pointed out that both the Government Accountability Office and the Financial Stability Oversight Council (FSOC) have recommended granting FHFA this authority.
MBA responded that mentioning FSOC as a justification was irrelevant because it“was made specifically in the context of cybersecurity concerns, and does not reference mortgage servicers or any risks that are inherent to the business of servicing loans.”
The Report to Congress also included performance results for Fannie Mae and Freddie Mac, both of which reported year-over-year income increases.
Fannie Mae reported annual net income of $12.3 billion and annual comprehensive income of $11.7 billion for 2016, compared to annual net income of $11.0 billion and annual comprehensive income of $10.6 billion for 2015.
Freddie Mac reported annual net income of $7.8 billion and annual comprehensive income of $7.1 billion for 2016, compared to annual net income of $6.4 billion and annual comprehensive income of $5.8 billion for 2015.
Fannie Mae purchased $581 billion of single-family mortgages in 2016, a 23-percent increase over 2015. Freddie Mac purchased $393 billion of single-family mortgages in 2016, an increaseof 12 percent from 2015.
Multifamily purchase volumes increased year-over-year for both enterprises, primarily driven by substantial growth in the overall multifamily market in 2016. Fannie Mae’s multifamily purchase volume in 2016 was $55.3 billion, an increase of $13 billion from 2015. Freddie Mac’s multifamily new purchase volume in 2016 was $56.8 billion, an increase of $9.6 billion from 2015.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.