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FHFA announces 2023 conforming loan limits
On November 29, FHFA announced that it will raise the maximum conforming loan limits (CLL) for mortgages purchased in 2023 by Fannie Mae and Freddie Mac from $647,200 to $726,200 (the 2022 CLL limits were covered by InfoBytes here). In most high-cost areas, the maximum loan limit for one-unit properties will be 1,089,300. According to FHFA, due to generally rising home values, “the CLLs will be higher in all but two U.S. counties or county equivalents.” A county-specific list of 2023 conforming loan limits for all counties and county-equivalent areas in the U.S. can be accessed here.
FHFA to host “tech sprints” on housing finance fintech solutions
On November 2, FHFA published a notice in the Federal Register announcing plans to hold a series of competitions called “Tech Sprints” to solicit innovative solutions on ways to advance housing finance fintech in a safe, sound, responsible, and equitable manner. Recognizing the significant effects that regulated entities’ potential use of fintech products and innovations could have on the mortgage market and market participants, FHFA said it wants to gather information about new and emerging technologies that may have applications in the mortgage space. Two tech sprints are planned each year over the next three years, with participation expected from housing finance industry members as well as other industries, such as tech companies, mortgage companies, academia, industry groups, and other members of the public. FHFA is accepting comments through January 3, 2023, on the necessity of the information collection, the burden of such collection, and ways to minimize the burden on members and project sponsors when providing information on ways to enhance the quality, utility, and clarity of the information collected from the Tech Sprints.
FHFA publishes new statistics on home valuations
On October 24, FHFA published a new Uniform Appraisal Dataset (UAD) Aggregate Statistics Data File, along with dashboards that provide visualizations of the newly available data related to home valuations. According to the press release, the UAD data file and dashboards provide stakeholders and the public access to a broad set of data points and trends found in appraisal reports that may be grouped by neighborhood characteristics and geographic levels. The data was compiled from 47.3 million UAD appraisal records collected from 2013 through the second quarter of 2022 on single-family properties. “As home valuations are a vital component of the mortgage process, publishing transparent, aggregate data on appraisals provides useful information to the public while protecting borrowers’ personally identifiable information,” FHFA Director Sandra L. Thompson said. “Today’s announcement exemplifies our commitment to the development of a more efficient and equitable valuation system that ultimately reduces appraisal bias.”
FHFA eliminates upfront fees for some borrowers
On October 24, FHFA announced the elimination of upfront fees for certain first-time homebuyers, low-income borrowers, and underserved communities as part of the agency’s ongoing review of Fannie Mae and Freddie Mac’s (GSEs) pricing framework. Specifically, upfront fees are eliminated for (i) first-time homebuyers who are at or below 100 percent of area median income (AMI) in most of the U.S. and below 120 percent of AMI in high-cost areas; (ii) HomeReady and Home Possible loans under the GSEs’ affordable mortgage programs; (iii) HFA Advantage and HFA Preferred loans; and (iv) single-family loans supporting the Duty to Serve program. These changes “will result in savings for approximately 1 in 5 borrowers of the [GSEs’] recent mortgage acquisitions,” FHFA Director Sandra L. Thompson said in the announcement, noting that the agency is working with the GSEs and will announce an implementation date shortly. The pricing updates also include targeted increases to upfront fees for most cash-out refinance loans. Implementation of these fees will start February 1, 2023, in order to minimize market and pipeline disruption.
FHFA announces validation of FICO 10T and VantageScore 4.0 for GSE use
On October 24, FHFA announced the validation and approval of both the FICO 10T credit score model and the VantageScore 4.0 credit score model for use by Fannie Mae and Freddie Mac (GSEs). The agency also announced that the GSEs will require two credit reports from the national consumer reporting agencies, rather than three. According to the announcement, FHFA expects implementation of FICO 10T and VantageScore 4.0 to be a multiyear effort, but once in place, lenders will be required to deliver both FICO 10T and VantageScore 4.0 credit scores with each loan sold to the GSEs. FHFA noted that FICO 10T and VantageScore 4.0 are more accurate than the classic FICO model because they include payment history for factors like rent, utilities, and telecommunications. FHFA also released a Fact Sheet on the newly approved models, which “will improve accuracy, strengthen access to credit, and enhance safety and soundness.”
FHFA proposes amendments to help GSEs better serve colonias
Recently, FHFA announced a notice of proposed rulemaking (NPRM) to amend its Enterprise Duty to Serve Underserved Markets regulation. Under Section 1129 of the Housing and Economic Recovery Act of 2008, Fannie Mae and Freddie Mac (GSEs) are required to develop loan products and flexible underwriting guidelines for facilitating “a secondary market for mortgages on housing for very low-, low-, and moderate-income families for the manufactured housing, affordable housing preservation, and rural housing markets.” The amendments would add a “colonia census tract” definition, which would serve as a census tract-based proxy for a “colonia” (as generally applied to “unincorporated communities along the U.S.-Mexico border in California, Arizona, New Mexico, and Texas that are characterized by high poverty rates and substandard living conditions”), and would amend the “high-needs rural region” definition by substituting “colonia census tract” for “colonia.” The NPRM would also revise the definition of “rural area” to include all colonia census tracts regardless of their location, in order to make GSE activities in all colonia census tracts eligible for duty to serve credit. “FHFA is committed to promoting affordability, equity, and sustainability in the nation’s housing finance markets, especially in underserved communities,” FHFA Director Sandra L. Thompson said in the announcement. “With this rule, we seek to remove barriers that have hindered the [GSEs’] Duty to Serve activities for people living in colonias.”
District Court rules in favor of FHFA on shareholders’ net worth sweep claims
On September 23, the U.S. District Court for the District of Columbia partially granted FHFA’s motion for summary judgment resolving claims brought by Fannie Mae and Freddie Mac (GSEs) shareholders in a lawsuit alleging the government exceeded its authority when it adjusted its Senior Preferred Stock Purchase Agreements (PSPAs) to allow net worth sweeps. The plaintiff shareholders claimed that FHFA acted outside its statutory authority when it adopted a third amendment to the PSPAs, which replaced a fixed-rate dividend formula with a variable one calculated on a quarterly basis (known as the “net worth sweep”). These sweeps, the plaintiffs contended, harmed their future dividend prospects. FHFA disagreed, arguing that the U.S. Supreme Court had already held in Collins v. Yellen (covered by InfoBytes here) that “the Third Amendment [to the PSPAs] was both authorized and a reasonable exercise of FHFA’s broad statutory power” and that “it is time to end this case.” With respect to the plaintiffs’ “remaining claim for breach of the implied covenant of good faith and fair dealing arising under Delaware and Virginia law,” the agency contended that the “Supreme Court unanimously held in Collins that FHFA—exercising its ‘expansive authority in its role as a conservator’—‘reasonably viewed [the Third Amendment] as more certain to ensure market stability’ than ‘the shareholders’ suggested strategy.’ … This holding alone forecloses Plaintiffs’ implied covenant claim.”
Following several years of litigation, the court granted FHFA’s motion for summary judgment “insofar as no genuine dispute remains on the fact of harm on the theory that plaintiffs were denied dividends that they otherwise were reasonably certain to receive, and insofar as plaintiffs’ proposed alternative remedy of rescission and restitution is barred as a matter of law.” However the court denied the motion “insofar as a genuine dispute of material fact remains on the fact of harm on the theory that plaintiffs’ shares lost much of their value, and in all other respects.” A memorandum opinion was filed under seal as it referenced documents filed under seal by the parties.
FHFA to review Federal Home Loan Banks system
On August 31, FHFA announced it plans to conduct a comprehensive review of the Federal Home Loan Banks (FHLBanks) starting this fall. “FHFA’s regulated entities function as a reliable source of liquidity and funding for housing finance and community investment,” FHFA Director Sandra L. Thompson said, noting that “[a]s the Federal Home Loan Banks approach their centennial, FHFA will conduct a comprehensive review to ensure they remain positioned to meet the needs of today and tomorrow.” FHFA will host two public listening sessions as well as a series of regional roundtable discussions to review the mission, membership eligibility requirements, and operational efficiencies of the FHLBanks, the statement said. Additionally, FHFA will receive input from stakeholders on the FHLBanks’ role or potential role in addressing housing finance, community and economic development, affordability, and other related issues.
The kick-off listening session will be held in Washington, D.C., on September 29. FHFA seeks feedback in six key areas: (i) FHLBanks’ general mission and purpose in a changing marketplace; (ii) the organization, operational efficiency, and effectiveness of FHLBanks; (iii) FHLBanks’ role in promoting affordable, sustainable, equitable, and resilient housing and community investment; (iv) ways to address the unique needs of rural and financially vulnerable communities; (v) member products, services and collateral requirements; and (vi) membership eligibility and requirements.
FHFA updates FAQs and clarifies Covid-19 tenant protections
On August 25, FHFA updated its Frequently Asked Questions (FAQ) regarding Fannie Mae and Freddie Mac assistance options for families impacted by the Covid-19 pandemic. Additionally, FHFA revised its “Tenant Protections for Enterprise-Backed Rental Properties in Response to COVID-19,” which is intended “to assist households that are unable to pay rent or utilities.” Among other things, the FAQs indicate that renters “living in a property financed by Fannie Mae or Freddie Mac have access to housing counselors with expertise in rental assistance programs and other programs to overcome financial hardships.” FHFA’s “Tenant Protections for Enterprise-Backed Rental Properties in Response to COVID-19,” clarifies and updates information for tenants in rental properties secured by a Fannie Mae or Freddie Mac mortgage.
FHFA to establish advisory committee on affordable, equitable, and sustainable housing
On August 23, FHFA announced plans to establish a federal advisory committee on affordable, equitable and sustainable housing. The committee’s activities will focus on Fannie Mae, Freddie Mac, and the Federal Home Loan Banks and “their respective roles in providing a reliable source of liquidity and funding to support housing finance in the single-family and multifamily housing markets.” The committee will provide advice and input regarding affordable, equitable, and sustainable housing needs, including barriers to accessing such housing and long-term sustainability, and will advise on any regulatory or policy changes necessary to address these matters. FHFA will solicit applications and nominations for memberships in an upcoming Federal Register notice and is seeking individuals engaged in the financing, development and/or administration of affordable, equitable, and sustainable housing and housing policy who have experience in areas such as fair housing, fair lending, civil rights, and single-family/multifamily lending and servicing.