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Financial Services Law Insights and Observations


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  • Ginnie Mae released the Social Impact and Sustainability Framework and supports broader access to mortgage financing

    Federal Issues

    On September 14, Ginnie Mae announced the launch of its “Social Bond” label to indicate underlying collateral that is designed to support a positive social and affordable housing outcome, and released the Social Impact and Sustainability Framework.

    The “Social Bonds” revision to Ginnie Mae’s standard forms of prospectus details attributes of Ginnie Mae MBS to provide transparency to investors. The insurance or guaranties extended under certain government programs reduce borrower credit risk, which promotes broader access to mortgage credit and/or less costly credit for borrowers, thereby expanding homeownership access and affordability among targeted populations (low-to-moderate income borrowers, veterans, senior citizens, rural communities, and/or tribal, Alaska Native, and Native Hawaiian communities).

    The Social Impact and Sustainability Framework highlighted Ginnie Mae’s role in connecting the global capital markets to America’s housing financial system and providing liquidity to support access to affordable housing and lending for first first-time homebuyers, low-to-moderate income households, veterans, seniors, and members of urban, rural, and tribal communities from inception.

    Federal Issues Ginnie Mae GSEs Consumer Finance Mortgages

  • Fannie Mae, Freddie Mac annual stress tests results

    Federal Issues

    On August 10, FHFA published the Dodd-Frank Act Stress Tests Results – Severely Adverse Scenario containing the results of the ninth annual stress tests conducted by Fannie Mae and Freddie Mac (GSEs) as required by the Dodd-Frank Act. Last year, FHFA published orders for the GSEs to conduct a stress test with specific scenarios to determine whether companies have the capital necessary to absorb losses as a result of severely adverse economic conditions (covered by InfoBytes here). According to the report, the total comprehensive income loss is between $8.4 billion and $9.9 billion depending on how deferred tax assets are treated. Notably, compared to last year, the severely adverse scenario includes a larger increase in the unemployment rate due to the lower unemployment rate at the beginning of the planning horizon. FHFA also expanded the scope of entities considered within the primary counterparty default component of the worldwide market shock. This expansion encompasses mortgage insurers, unsecured overnight deposits, providers of multifamily credit enhancements, nonbank servicers, and credit risk transfer reinsurance counterparties.

    Federal Issues FHFA Fannie Mae Freddie Mac GSEs Mortgages Stress Test Dodd-Frank EGRRCPA

  • FHA proposes to change lender and mortgagee requirements, clarify GSE definition

    Agency Rule-Making & Guidance

    On July 18, FHA announced a proposed rule for public comment that would revise requirements for investing lenders and mortgagees “to gain or maintain status as an FHA-approved lender or mortgagee.” The proposed rule would also “separately define Government-Sponsored Enterprises (GSEs) and the Federal Home Loan Banks (FHLB) from other governmental entities and align general FHA approval standards with current industry business practices.” The proposed changes are mainly aimed at accommodating more precise language and definitions concerning an investing lender or mortgagee's limited participation in FHA programs. According to FHA, these changes do not represent a significant departure from existing requirements for most lenders and mortgagees involved in originating, endorsing, or servicing FHA-insured loans. Through the proposed rule, HUD proposes to: (i) “separately define the GSEs and their approval requirements from other Federal, State, or municipal governmental agencies and Federal Reserve Banks”; (ii) include Freddie Mac, Fannie Mae, and the FHLBs in the GSE definition; (iii) add language to require investing lenders and mortgagees to comply with applicable audit and financial statement requirements; and (iv) “clarify that investing lenders and mortgagees must comply with FHA’s annual certification requirements.”

    Agency Rule-Making & Guidance Federal Issues FHA Mortgages FHLB GSEs Fannie Mae Freddie Mac

  • Freddie allows digital paystubs in underwriting

    Agency Rule-Making & Guidance

    On May 22, Freddie Mac announced new capabilities allowing lenders to use a borrower’s digital paystub data when assessing income paid through direct deposit. Lenders will be able to access the enhancements to Freddie’s automated income assessment tool through the Loan Product Advisor (LPA) asset and income modeler (AIM). Freddie noted that in addition to providing access to direct deposit data, AIM is also able to “assess income from tax return data for self-employed borrowers as well as bank account data to identify a history of positive monthly cash flow activity” to help first-time homebuyers and borrowers in underserved communities who may not qualify through traditional methods of underwriting. AIM is also designed to notify lenders when submitting this type of account data may benefit a borrower. The new AIM capability will be available beginning June 7 to Freddie-approved sellers that use LPA.

    Agency Rule-Making & Guidance Federal Issues Freddie Mac Mortgages GSEs Consumer Finance Underwriting

  • FHFA requests feedback on single-family pricing framework

    Agency Rule-Making & Guidance

    Recently, the FHFA issued a request for input (RFI) on a single-family pricing framework for Fannie Mae and Freddie Mac (GSEs), including feedback on policy priorities and goals that FHFA should pursue in its oversight of the framework. “Through this RFI, FHFA seeks input on how to ensure the pricing framework adequately protects the [GSEs] and taxpayers against potential future losses, supports affordable, sustainable housing and first-time homebuyers, and fosters liquidity in the secondary mortgage market,” FHFA Director Sandra L. Thompson said in the announcement. The RFI also seeks input on the GSEs’ single-family upfront guarantee fees and whether it is appropriate to continue linking those fees to the Enterprise Regulatory Capital Framework. FHFA explained that guarantee fees are intended to cover the GSEs’ administrative costs, expected credit losses, and cost of capital associated with guaranteeing securities backed by single-family mortgage loans. Comments on the RFI are due August 14.

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

  • FHFA rescinds GSE fee based on DTI ratios

    Agency Rule-Making & Guidance

    On May 10, FHFA announced it is rescinding a debt-to-income-based loan-level pricing adjustment announced in January. As previously covered by InfoBytes, FHFA made several changes relating to upfront fees for certain borrowers with debt-to-income (DTI) ratios above 40 percent. The updated and recalibrated pricing grids also included the upfront fee eliminations announced last October to increase pricing support for purchase borrowers limited by income or by wealth, FHFA said at the time. The implementation of the DTI pricing adjustment, which would have affected loans acquired by Fannie Mae and Freddie Mac, was delayed to August 1, but after the mortgage industry and other market participants expressed concerns about implementation challenges, FHFA made the decision to rescind the DTI-ratio based fee to provide additional transparency. The agency will issue a request for public input on the single-family guarantee fee pricing framework shortly.

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

  • FHFA seeks to codify fair lending oversight

    Agency Rule-Making & Guidance

    On April 19, FHFA issued a notice of proposed rulemaking (NPRM) to codify several existing practices and programs relating to the agency’s fair lending oversight requirements for the Federal Home Loan Banks and Fannie Mae and Freddie Mac (GSEs). Intended to provide increased public transparency and greater oversight and accountability to the regulated entities’ fair housing and fair lending compliance, the NPRM seeks to also formalize requirements for the GSEs to maintain Equitable Housing Finance Plans, which are designed to address racial and ethnic disparities in homeownership and wealth and foster housing finance markets that provide equitable access to affordable and sustainable housing (covered by InfoBytes here). The NPRM will also codify requirements for the GSEs to collect and report homeownership education, housing counseling, and language preference information from the Supplemental Consumer Information Form (SCIF). Lenders are required to use the SCIF as part of the application process for loans with application dates on or after March 1, that will be sold to the GSEs (covered by InfoBytes here). Comments on the NPRM are due 60 days after publication in the Federal Register.

    Agency Rule-Making & Guidance Federal Issues FHFA Freddie Mac Fannie Mae GSEs FHLB Underserved Fair Lending Consumer Finance

  • FHFA rule targets GSE eligibility in colonias

    Agency Rule-Making & Guidance

    On April 12, FHFA published a final rule amending its Enterprise Duty to Serve Underserved Markets regulation. The final rule, which was adopted without change from the proposed rule issued last year (covered by InfoBytes here), allows Fannie Mae and Freddie Mac (GSE) activities in all colonia census tracts to be eligible for Duty to Serve credit. Specifically, the amendment adds a “colonia census tract” definition to 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”). The final rule also amends the “high-needs rural region” definition by substituting “colonia census tract” for “colonia,” and revises 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. The final rule takes effect July 1.

    Agency Rule-Making & Guidance Federal Issues FHFA Underserved Fannie Mae Freddie Mac GSEs Consumer Finance

  • FHFA updates GSE equitable housing finance plans

    Agency Rule-Making & Guidance

    On April 5, FHFA announced updates to Fannie Mae and Freddie Mac’s (GSEs) equitable housing finance plans for 2023. (See plans here and here.) The updates include adjustments to plans first announced last year (covered by InfoBytes here), which faced pushback from several Republican senators who argued that the plans raised “significant legal concerns” and that “no law authorizes FHFA to use a GSE’s assets to pursue affirmative action in housing.” (Covered by InfoBytes here.) The senators also argued that the Biden administration was “conscripting the GSEs as instrumentalities of its progressive racial equity agenda to achieve outcomes it cannot achieve legislatively or even legally.”

    According to FHA’s announcement, the updated plans provide the GSEs with a three-year roadmap to address barriers to sustainable housing opportunities. Updates include (i) taking actions to remove barriers faced by Latino renters and homeowners in Fannie Mae’s plan; (ii) an improved focus on ensuring existing borrowers are able to receive fair loss mitigation support and outcomes through monitoring and developing strategies to close gaps; (iii) providing financial capabilities coaching to build credit and savings; (iv) supporting locally-owned modular construction facilities in communities of color; and (v) increasing the reach of GSE special purpose credit programs to support homeownership attainment and housing sustainability in underserved communities.

    Agency Rule-Making & Guidance Federal Issues FHFA Fannie Mae Freddie Mac GSEs Fair Lending Consumer Finance Underserved Disparate Impact

  • FHFA proposes changes to GSE regulatory capital framework

    Agency Rule-Making & Guidance

    On February 23, FHFA issued a notice of proposed rulemaking (NPRM) to amend the Enterprise Regulatory Capital Framework (ERCF) that governs Fannie Mae and Freddie Mac. (See also FHFA fact sheet here.) Changes include modifications to the capital requirements for commingled securities, the introduction of a 0.6 risk multiplier for calculating multifamily mortgage exposures backed by properties with certain government subsidies, the introduction of a standardized approach for calculating counterparty credit risk for derivatives and cleared transactions, and modifications for how representative credit scores for single-family loans are determined. Fannie and Freddie would also be required to “assign an original credit score of 680 to single-family mortgage exposure without a permissible credit score at origination” instead of 600. The NPRM also modifies “guarantee assets, mortgage servicing assets, time-based calls for [credit risk transfer] exposures, interest-only [mortgage-backed securities], the single-family countercyclical adjustment, the stability capital buffer, and the compliance date for the advanced approaches.” Comments on the NPRM are due 60 days after publication in the Federal Register.

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


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