WASHINGTON — The director of the Federal Housing Finance Company stated the company would “reexamine” the construction and position of the Federal Dwelling Mortgage banks within the U.S. housing market, the primary attainable steps of long-sought reform.
Testifying throughout an oversight listening to of the Home Monetary Providers Committee, FHFA Director Sandra L. Thompson informed lawmakers in her opening remarks that the company would quickly start a proper evaluate of the Federal Dwelling Mortgage Financial institution System. The federal government sponsored enterprises, created within the Nineteen Thirties, have drawn scrutiny as their core enterprise within the housing market has declined amid historic ranges of liquidity within the banking system.
“As we close to the one hundredth anniversary” of the Dwelling Mortgage banks, “now is an efficient time to reexamine their method to make sure they proceed to serve the wants of at the moment and tomorrow,” Thompson stated. “We plan to have interaction quite a lot of stakeholders within the coming months as we full this evaluate and, after all, welcome the enter of members of Congress.”
In her written testimony, Thompson stated the FHFA would “conduct a 90-year lookback, in addition to a forward-looking evaluation of” the Dwelling Mortgage Financial institution System. She additionally stated the company would maintain “public listening periods all through the nation” and “look at all the pieces from the banks’ membership base, operational effectivity, and effectiveness, to extra foundational questions on mission, objective, and group.”
Thompson acquired a heat welcome from Democrats on the Home Monetary Providers Committee in her first look since being Senate-confirmed to her position earlier this yr. Committee Chair Maxine Waters of California stated that the Biden appointee had “taken essential steps to set the FHFA on a brand new path ahead” by eliminating insurance policies launched beneath the Trump administration that “made it dearer for households to purchase or refinance their properties.”
Thompson’s Trump-era predecessor, former FHFA Director Mark Calabria, was introduced up repeatedly throughout Wednesday’s listening to. Republicans expressed help for insurance policies launched by Calabria earlier than he was ousted by the Biden administration, whereas Democrats blasted his tenure and argued his insurance policies had made homeownership more durable to attain for some Individuals.
Rating Member Patrick McHenry, the North Carolina Republican, criticized Thompson for undoing Calabria’s modifications to the FHFA’s capital requirement framework, which had launched banklike capital necessities for the government-sponsored enterprises Fannie Mae and Freddie Mac.
“As an alternative of working to keep up stability, FHFA has weakened our housing finance system by lowering taxpayer protections and pushing new dangerous schemes,” McHenry stated. “For instance, the company rescinded the capital and liquidity rule designed to make sure that the GSEs may climate an financial downturn. We’re involved about that.”
McHenry’s remarks echoed considerations he raised earlier in July in a letter co-signed by fellow Republican Rep. French Hill of Arkansas. The 2 lawmakers urged Thompson to make sure that the FHFA’s authorities sponsored enterprises not develop into new areas of finance.
Thompson, previously a regulator on the Federal Deposit Insurance coverage Corp., stated modifications made to capital necessities by the FHFA beneath her management would “shield taxpayers whereas nonetheless requiring the enterprises to carry a considerable quantity of capital.”
“FHFA will proceed to advertise sustainable and equitable entry to credit score in a accountable method that doesn’t compromise security and soundness,” Thompson stated in her written testimony.
A number of Republicans requested concerning the FHFA’s progress towards releasing Fannie Mae and Freddie Mac from conservatorship. At one level, Thompson stated that whereas the FHFA’s mixed capital aim between Fannie and Freddie was roughly $300 billion beneath the present framework, different elements would additionally play into whether or not and when the GSEs can be launched again into non-public management.
Requested by Missouri Rep. Blaine Luetkemeyer whether or not assembly the $300 billion threshold can be sufficient to launch the GSEs from conservatorship, Thompson stated there have been “different elements that have to be considered,” together with an examination of coverage dangers related to establishments which have important publicity to Fannie and Freddie inventory.
Thompson additionally advised throughout Wednesday’s listening to that the FHFA would welcome an growth of its authority to straight supervise third-party service suppliers for GSEs. Requested by Democratic Rep. Invoice Foster of Illinois whether or not that authority would help the company’s mission, Thompson stated the FHFA had been asking for such powers “for numerous years,” noting that the federal financial institution regulators already had important authority over third-party suppliers.
“Actually, once I acquired to the FHFA from the FDIC, I used to be very stunned that we didn’t have that authority,” Thompson stated. “The companies which are offered to our regulated entities are actually vital; they might affect security and soundness of our regulated entities.”