January 25, 2019

FHFA indicates housing finance reform coming soon

house for saleFederal Housing Finance Agency (FHFA) Acting Director Joseph Otting recently told staff to expect a housing finance reform plan from the administration and Treasury Department within the next month, according to Politico. After that, Otting said he expects significant progress to be made within "six to 18 months."

Earlier this month, NAFCU President and CEO Dan Berger sent a letter to Otting on 2019 priorities that reiterated the need to ensure credit unions' unhampered access to the secondary mortgage market in any reform actions, and also asked for clarification on how the new proposed capital requirements rule could affect their ability to sell loans to the government-sponsored enterprises (GSEs), among other things.

NAFCU has previously shared its core principles for housing financial reform that should be included in any final reform measures with lawmakers and numerous officials in the Trump administration. The association's core principles are also cited in a recent report from the Government Accountability Office (GAO) calling on Congress to consider housing finance reform legislation.

In November, NAFCU provided comments to the Federal Housing Finance Agency (FHFA) on its proposed capital rule for the GSEs. The association generally supports the proposal, but recommended the FHFA allow the GSEs to submit capital restoration plans as allowed under the Housing and Economic Recovery Act (HERA) – a provision that makes clear Congress envisioned a path to remove the GSEs from conservatorship. NAFCU also argued that restoration plans shouldn't be approved until Congress has agreed to codify certain safeguards. The GAO report notes the need for safeguards to reduce risk as the GSEs are recapitalized.

The association has urged the Trump administration and Congress to work together on a comprehensive solution to housing finance reform, and has argued that the continued conservatorship of the GSEs is unsustainable. In addition to providing feedback on the capital proposal, NAFCU has also offered support for the GSEs to create and use a uniform mortgage-backed security (UMBS).