Lawmakers Demand More FHFA Oversight into Enterprise Offerings
Written By: Joel Palmer, Op-Ed Writer
Republican members of the House Subcommittee on Housing, Community Development, and Insurance, have asked the director of the Federal Housing Finance Agency (FHFA) to be more involved in the approval of new products issued by Fannie Mae and Freddie Mac.
The group sent a letter earlier this month to FHFA Director Sandra Thompson urging the newly confirmed director to finalize a rule titled “Prior Approval of Enterprise Products.” The rule was proposed in October 2020. The lawmakers believe this rule would “ensure there is adequate oversight and transparency around new products and activities the Enterprises bring into the market.”
The 2020 rule came out of a section of the Economic Recovery Act of 2008. Had it been adopted, it would have replaced an interim rule issued in 2009 that established a process for Fannie and Freddie to obtain prior approval from the FHFA director for a new product and prior notice of new activities.
In the background section of the proposed rule, it’s noted that while Fannie and Freddie can create new opportunities and access through new products, they “also take on risks, and create risks for themselves and the mortgage finance, financial system and the broader economy, through their activities and product offerings.”
The letter to Thompson was prompted by the release last month of the enterprises' Equitable Housing Finance Plans. The three-year plans were required by FHFA to address equality in housing finance. The plans included consumer education initiatives for renters and homeowners, credit reporting to help tenants build credit profiles and enable better access to financial services, expanded counseling services to support housing stability, technology to improve access to sustainable credit and fair home appraisals, and Special Purpose Credit Programs (SPCPs) to address barriers to sustainable homeownership.
Both plans provide a year-by-year list of targets and outcomes. FHFA has created a pilot transparency framework that requires the enterprises to publish and maintain a list of pilots and test-and-learn activities on their websites.
The lawmakers’ letter stated that “requiring the Enterprises to publish a list of their pilots and test-and-learn activities twice a year does not substitute for robust oversight by their conservator.”
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.
