FHFA Releases Proposed “Living Will” Rule for GSEs
Written By: Joel Palmer, Op-Ed Writer
The Federal Housing Finance Agency (FHFA) took another step toward ending the conservatorships of Fannie Mae and Freddie Mac with a proposed rule released last week.
The proposed rule would require the two GSEs to develop credible resolution plans, also known as living wills, to “facilitate a rapid and orderly resolution should FHFA have to be appointed their receiver under the Housing and Economic Recovery Act of 2008.”
The proposed rule directs the enterprises to demonstrate how they would maintain vital business lines, “without extraordinary government support,” in the event of another adverse financial situation such as the 2008 financial crisis that helped land the GSEs in government conservatorship.
The proposed rule is similar to those issued by the Federal Reserve Board and the Federal Deposit Insurance Corporation under the Dodd–Frank Wall Street Reform and Consumer Protection Act, which requires many large financial institutions to submit living wills.
“The rule proposed today is an important step toward a stronger housing finance system. Requiring the enterprises to develop living wills, helps FHFA fulfill its responsibility to ensure that the failure of an Enterprise would harm neither taxpayers nor the mortgage market," said FHFA Director Mark Calabria.
“The proposed rule gives FHFA a tool that supplements its existing statutory authorities to restructure a failed Enterprise so that government does not have to put the Enterprises into conservatorship again.”
COVID-19 provisions extended
FHFA also announced last week that it extended COVID-19 forbearance to qualifying multifamily property owners.
The programs, set to expire on December 31, 2020, have now been extended to March 31, 2021.
Under the program, property owners with enterprise-backed multifamily mortgages can enter a new or, if qualified, modified forbearance if they experience a financial hardship due to the COVID-19 emergency.
Property owners who enter into a new or modified forbearance agreement must:
Inform tenants in writing about tenant protections available during the property owner's forbearance and repayment periods; and
Agree not to evict tenants solely for the nonpayment of rent while the property is in forbearance.
The Federal Housing Administration (FHA) also extended a COVID-19 related protection for single-family homeowners.
Homeowner with FHA-insured mortgages are protected by a foreclosure and eviction moratorium through February 28, 2021.
That is also the new deadline for borrowers with FHA-insured mortgages to request an initial COVID-19 forbearance from their mortgage servicer to defer or reduce their mortgage payments for up to six months. In addition, FHA also extended multiple temporary provisions for lenders and servicers to allow them to continue doing FHA business despite social distancing considerations.
FHA also extended:
The timeframe for providing an insurance endorsement on single family mortgages in forbearance through March 31, 2021.
Temporary re-verification of employment guidance and exterior-only appraisal inspection option through February 28, 2021.
Temporary provisions for verification of self-employment, rental income, and 203(k) Rehabilitation Mortgage escrow accounts through February 28, 2021.
About the Author
As an NAMU® 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.
