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Financial Services Law Insights and Observations


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  • 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.

    Courts FHFA Net Worth Sweep Fannie Mae Freddie Mac U.S. Supreme Court

  • FHFA to review Federal Home Loan Banks system

    Federal Issues

    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.

    Federal Issues FHFA Federal Home Loan Banks

  • FHFA updates FAQs and clarifies Covid-19 tenant protections

    Federal Issues

    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.

    Federal Issues FHFA Covid-19 GSEs Fannie Mae Freddie Mac Mortgages

  • FHFA to establish advisory committee on affordable, equitable, and sustainable housing

    Federal Issues

    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.

    Federal Issues FHFA Fair Lending Fannie Mae Freddie Mac Federal Home Loan Banks

  • FHFA, Ginnie Mae update minimum financial eligibility requirements for enterprise seller/servicers and issuers

    Agency Rule-Making & Guidance

    On August 17, FHFA and Ginnie Mae released a joint announcement regarding updated minimum financial eligibility requirements for seller/servicers and issuers. Ginnie Mae also updated its requirements for servicers of Ginnie Mae mortgages in coordination with FHFA. According to the standards, sellers and servicers will be required to maintain a base net worth of $2.5 million plus 35 basis points of the unpaid principal balance for Ginnie Mae servicing and 25 basis points of the unpaid principal balance for all other 1-to-4-family loans serviced. Fannie and Freddie sellers and servicers would be required to maintain a capital ratio of tangible net worth to total assets that is greater than or equal to 6 percent. Depository institutions would continue to rely on their prudential regulatory standards to meet the GSEs’ capital and liquidity requirements. According to HUD Secretary Marcia L. Fudge, the standards “ensure that we continue to address the needs of underserved communities through easy, equitable and sustained access to mortgage credit.” FHFA also released FAQs regarding the seller/servicer minimum financial eligibility requirements, and Ginnie Mae released eligibility requirement comparison tables.

    Agency Rule-Making & Guidance Federal Issues FHFA Ginnie Mae Fannie Mae Freddie Mac Mortgages Mortgage Servicing

  • FHFA proposes new GSE multifamily housing goals

    Agency Rule-Making & Guidance

    On August 16, FHFA announced a proposed rule regarding benchmark levels for the 2023 and 2024 multifamily housing goals for Fannie Mae and Freddie Mac (GSEs). According to the proposed rule, the GSEs will switch from using the number of units in multifamily properties financed annually by each institution to a new methodology of using the percentage of units financed. Instead of measuring the multifamily housing goals based on a n​umbe​​r ​​of units, the proposed rule would use the ​percentage​ ​​​​​​of each of the GSE’s annual multifamily loan acquisitions that are affordable to each income category. FHFA acknowledged that the existing methodology does not incentivize the GSEs to continue to acquire mortgages backed by goal-qualifying units after the institutions have purchased enough mortgages to meet the minimum numeric benchmark levels. According to FHFA Director Sandra Thompson, the proposal “would ensure that each [of the GSE’s] focus remains on affordable segments of the multifamily market and reaffirms FHFA’s commitments to its statutory duty to promote affordability nationwide.”

    Agency Rule-Making & Guidance Federal Issues FHFA GSEs Fannie Mae Freddie Mac Mortgages Multifamily

  • FHFA to require servicers to maintain fair lending data

    Agency Rule-Making & Guidance

    On August 10, the FHFA announced that Fannie Mae and Freddie Mac will start requiring servicers to obtain and maintain borrowers’ fair lending data on their loans. Data must transfer with servicing throughout the mortgage term, the announcement states, adding that beginning March 1, 2023, servicers will be required to collect borrower data including age, race, ethnicity, gender, and preferred language. The update follows an announcement issued in May (covered by InfoBytes here), which requires lenders to collect information on the borrower’s language preference, and on any homebuyer education or housing counseling that the borrower received, so that lenders can increase their understanding of borrowers’ needs throughout the home buying process. To facilitate the upcoming changes, Freddie Mac issued servicing Bulletin 2022-17, which outlines servicing requirements and notes that data elements must be stored in a format that can be searched, queried, and transferred. Simultaneously, Fannie Mae issued SVC-2022-06 to incorporate the new fair lending data requirements into its Servicing Guide. “Having fair lending data travel with servicing will help servicers do the important work of providing assistance to borrowers in need, helping to further a sustainable and equitable housing finance system,” FHFA Director Sandra Thompson said, adding that this need arose from the foreclosure crisis and Covid-19 response.

    Agency Rule-Making & Guidance Federal Issues FHFA Fair Lending Mortgages Mortgage Servicing Fannie Mae Freddie Mac GSEs Consumer Finance

  • Senate Republicans urge FHFA to “abandon” equitable finance plans

    Federal Issues

    On July 19, twelve Republican Senators wrote a letter to FHFA Director Sandra Thompson expressing their “many significant concerns” about “race-based housing subsidies” in the recently released Equitable Housing Finance Plans for Fannie Mae and Freddie Mac (GSEs). As previously covered by InfoBytes, in June, the GSEs released their Equitable Housing Finance Plans for 2022-2024 (available here and here), affirming their commitment to addressing racial and ethnic disparities in homeownership and wealth. The plans were developed following FHFA’s September 2021 request for public input, which invited comments to help the GSEs prepare their first plans and to aid FHFA in overseeing the plans (covered by InfoBytes here). In the letter, the Senators argued that the plans “raise significant legal concerns,” adding that “no law authorizes FHFA to use a GSE’s assets to pursue affirmative action in housing.” The Senators also wrote that the Biden administration “is conscripting the GSEs as instrumentalities of its progressive racial equity agenda to achieve outcomes it cannot achieve legislatively or even legally.” The Senators urged Thompson to “abandon” the plans and, “in anticipation of litigation challenging the legality” of them, requested that the GSEs “retain all correspondence with FHFA and other records relating to these plans.”

    Federal Issues FHFA U.S. Senate Freddie Mac Fannie Mae GSEs Consumer Finance Underserved Mortgages

  • FHFA launches Office of Financial Technology


    On July 18, FHFA announced the establishment of the Office of Financial Technology to help address emerging fintech risks and priorities. The new office will support the agency in: (i) developing strategies for FHFA-regulated entities to advance safe, responsible, and equitable fintech innovation; (ii) sharing best practices related to fintech in housing finance; (iii) establishing outreach through regulated entities to promote awareness and understanding of fintech innovation; (iv) facilitating interagency collaboration and partnerships with other regulators; and (v) providing resources on innovation, general trends, and emerging risks in housing finance. The new office will also help develop strategies for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks to advance fintech in a responsible manner.

    The agency also issued a request for information (RFI) on the role of financial technology in housing finance and the risks and opportunities presented by technology throughout the mortgage lifecycle. Among other things, the RFI seeks feedback on ways the agency can “constructively interact with other stakeholders to facilitate responsible innovation, including the identification of any barriers to or challenges in implementing fintech in the housing finance ecosystem, while also focusing on supporting equity in the housing finance landscape for both homeowners and renters.” FHFA stated it also has an interest in understanding ways technology might automate and increase the effectiveness of compliance and regulatory processes (broadly referred to as “regtech”), commenting that “[r]egtech provides an opportunity to enhance transparency, consistency, and standardization of those processes, while reducing compliance costs.” Comments are due by October 16.

    Fintech Agency Rule-Making & Guidance Federal Issues FHFA Fannie Mae Freddie Mac Federal Home Loan Banks Mortgages Consumer Finance

  • CFPB publishes rulemaking agenda

    Federal Issues

    Recently, the Office of Information and Regulatory Affairs released the CFPB’s spring 2022 rulemaking agenda. According to the preamble, the information in the agenda is current as of April 1, 2022 and identifies regulatory matters that the Bureau “reasonably anticipates having under consideration during the period from June 1, 2022 to May 31, 2023.”

    Key rulemaking initiatives include:

    • Consumer Access to Financial Records. The Bureau notes that it is considering rulemaking to implement section 1033 of the Dodd-Frank Act to address the development and use of standardized formats for information made available to consumers. The Bureau will release materials in advance of convening a panel under the Small Business Regulatory Enforcement Fairness Act (SBREFA), in conjunction with the Office of Management and Budget and the Small Business Administration’s Chief Counsel for Advocacy.
    • Amendments to FIRREA Concerning Automated Valuation Models. The Bureau is participating in interagency rulemaking with the Fed, OCC, FDIC, NCUA, and FHFA to develop regulations to implement the amendments made by the Dodd-Frank Act to FIRREA concerning appraisal automated valuation models (AVMs). The FIRREA amendments require implementing regulations for quality control standards for AVMs. The Bureau released a SBREFA outline in February 2022 and estimates in the agenda that the agencies will issue an NPRM in December 2022 (covered by InfoBytes here).
    • Property Assessed Clean Energy Financing. The Bureau issued an ANPR in March 2019 to extend TILA’s ability-to-repay requirements to PACE transactions (covered by InfoBytes here). The Bureau is working to develop a proposed rule to implement Economic Growth, Regulatory Relief, and Consumer Protection Act section 307 in May 2023.
    • Small Business Lending Data Collection Under the Equal Credit Opportunity Act. Section 1071 of the Dodd-Frank Act amended ECOA to require financial institutions to report information concerning credit applications made by women-owned, minority-owned, and small businesses, and directed the Bureau to promulgate rules for this reporting. The Bureau issued an NPRM in August 2021, and the comment period ended January 6 (covered by InfoBytes here). The agenda indicates that the Bureau estimates issuance of a final rule in March 2023.
    • Adverse Information in Cases of Human Trafficking Under the Debt Bondage Repair Act. The National Defense Authorization Act amended the FCRA to prohibit consumer reporting agencies from providing reports containing any adverse items of information resulting from human trafficking. In June 2022, the CFPB issued a final rule implementing amendments to the FCRA intended to assist victims of human trafficking (covered by InfoBytes here).

    Federal Issues Agency Rule-Making & Guidance CFPB Dodd-Frank Small Business Lending SBREFA PACE Programs AVMs Bank Regulatory Section 1033 Section 1071 ECOA FCRA OCC Federal Reserve FDIC NCUA FHFA


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