Management Change at FHFA Likely Means GSE Conservatorship Will Remain Indefinitely
Written By: Joel Palmer, Op-Ed Writer
Prior to be ousted last week, one of former FHFA Director Mark Calabria’s final acts was releasing the agency’s 2020 Report to Congress.
In a section about the conservatorship of Fannie Mae and Freddie Mac, the report noted that these enterprises were originally chartered by Congress “to be counter-cyclical sources of stability for housing finance markets.” As such, the report stated, the enterprises “must be ready to expand their business in times of general financial stress, and to “prepare the resources they will deploy in a downturn while conditions are still strong.”
The report concluded that “new enterprise activities during conservatorship should be limited and clearly aligned to core guaranty activities, to reducing risk, and to supporting the objective of exiting conservatorship.”
An appointee of former President Donald Trump, Calabria worked toward ending conservatorship. The Federal Housing Finance Agency (FHFA) announced several initiatives, including capital requirements, at the end of 2020 to prepare the GSEs to be released from government ownership.
That stands in stark contrast to the Biden administration’s goals for Fannie Mae and Freddie Mac. Now the administration has its own appointee leading the agency, marking an indefinite delay to ending government ownership of Fannie and Freddie.
As widely reported last week, the United States Supreme Court opened the way for the Biden Administration to replace Calabria as director of FHFA. The president wasted no time in doing so, replacing him with Sandra L. Thompson. She will run the agency until the administration can get a full-time director appointed by the Senate.
Since 2013 Thompson, had served as Deputy Director of the Division of Housing Mission and Goals (DHMG), where she oversaw FHFA’s housing and regulatory policy, capital policy, financial analysis, fair lending and all mission activities for Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Prior to that she worked for the Federal Deposit Insurance Corp for more than 23 years.
Prior to the Supreme Court decision, Calabria could have remained on the job until 2024 unless he was fired for cause. That would provided him and the agency enough time to prepare for and execute an end to conservatorship.
Biden’s main housing goal during the 2020 presidential campaign was a 10-year initiative aimed at making housing more accessible. There was nothing in the housing plan about ending conservatorship.
Shortly after being inaugurated, the new president’s first housing decision was giving individuals classified under the “Deferred Action for Childhood Arrivals” program (DACA) the ability to apply for FHA mortgages.
Rather than using their capital to get out of government ownership, industry observers generally agree that the administration and its new FHFA director will focus on using the GSEs’ capital to increase housing accessibility for minorities and low-income households.
Laurie Goodman, vice president for housing finance policy at the Urban Institute, told The New York Times that she did not expect any push by the Biden administration to end conservatorship any time soon. One goal she expected the agency to focus on instead was encouraging Fannie and Freddie to promote lending to buyers of mobile homes, which is often seen as a more affordable path to homeownership.
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.
