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Warning that "in their current condition, Fannie and Freddie will fail in a downturn," Federal Housing Finance Agency (FHFA) Director Mark Calabria stressed the importance of reforming the government-sponsored enterprises (GSEs). Of note, Calabria said the agency will know soon whether it needs to re-propose the GSEs' capital rule, which he described as "the most important rulemaking" he will make while at the FHFA.

Calabria made the comments during a House Financial Services Committee hearing Tuesday. Treasury Department Secretary Steven Mnuchin and Housing and Urban Development (HUD) Secretary Ben Carson also testified. Ahead of the hearing, NAFCU reiterated its housing finance reform principles and called for congressional action to guarantee certain elements.

At NAFCU's Congressional Caucus last month, Calabria made similar comments about the capital rule and added that he views it as a prerequisite before the GSEs are removed from conservatorship. NAFCU, commenting on the proposal, offered its general support but recommended the FHFA allow the GSEs to submit capital restoration plans as allowed under the Housing and Economic Recovery Act – a provision that makes clear Congress envisioned a path to remove the GSEs from conservatorship. The association also believes that restoration plans shouldn't be approved until Congress has agreed to codify certain safeguards.

In addition, Calabria indicated the FHFA's willingness to let the GSEs' qualified mortgage (QM) patch to expire. The CFPB has issued an advance notice of proposed rulemaking on the issue ahead of the patch's potential expiration; NAFCU urged the CFPB to adopt viable alternatives that allow credit unions "the same protections and benefits, including access to the secondary market, and the ability to provide credit for their members" if the CFPB decides not to extend the patch.

Other issues discussed during the hearing:

• Federal Home Loan Banks (FHLBs): Calabria mentioned that the FHFA will soon be issue a request for information for the FHLBs' membership requirements. NAFCU has previously recommended that the FHFA include credit unions in its FHLB goals proposal, specifically for small member participation and affordable housing loans. The membership issue is currently included in the Treasury's housing finance reform plan, which specifically discusses allowing captive insurance companies to become members of the FHLBs.
• Current expected credit loss (CECL) standard: Rep. Blaine Luetkemeyer, R-Mo., referenced a letter he sent to Mnuchin last week urging the Financial Stability Oversight Council to conduct a study on CECL. Mnuchin said the council will discuss the issue at its next meeting, and members were pleased with the standard's delay. NAFCU will continue to seek additional relief for credit unions under the standard.
• 30-year fixed rate mortgage: Mnuchin committed to retaining the 30-year fixed rate mortgage, which NAFCU is supportive of as it helps more Americans achieve homeownership.