A group of 14 housing and civil rights organizations is calling on the Federal Housing Finance Agency (FHFA) to revise its Enterprise Regulatory Capital Framework for Fannie Mae and Freddie Mac.
“The proposed capital rule conflicts with the GSEs’ [government-sponsored enterprises’] charter mission by treating the GSEs as banks. As a result of this approach, the rule would unnecessarily increase the cost of mortgage credit with a disproportionate impact on low- to moderate-income borrowers and borrowers of color,” says the group in a letter.
The group urges FHFA to revise the proposed rulemaking to “comply more appropriately with the GSEs’ mission” and offered the following recommendations:
- Refrain from adopting bank capital rules for the GSEs;
- Count a portion of guarantee fee revenue as capital for risk-based capital requirements;
- Treat properly discounted credit risk transfers as a component of required credit risk capital;
- Eliminate the punitive stability capital buffer and the countercyclical capital buffer;
- Lower the leverage ratio to the alternative proposal from the 2018 proposed rule of 1.5% for trust assets and 4% for retained portfolio; and
- Regulate the GSEs as utilities to promote affordability and more equitably serve low- to moderate borrowers and families of color, as well as to promote safety and soundness of the GSEs.
“The proposed rule fails to appropriately balance the mission of the GSEs and their safety and soundness,” says National Housing Council (NHC) president and CEO David M. Dworkin. “The levels of capital and the leverage ratio recommended in the proposed rule would disrupt housing markets and significantly raise the cost of homeownership. In the middle of an unprecedented pandemic and the worst recession since the Great Depression, now is not the time to restrict credit or alter the fundamental infrastructure of the housing economy,” Dworkin says.
The Aug. 31 letter is backed by the Center for Responsible Lending, Consumer Federation of America, Leadership Conference on Civil and Human Rights, NAACP, National Association of Hispanic Real Estate Professionals, National Association for Latino Community Asset Builders, National Association of Real Estate Brokers, National CAPACD, National Community Reinvestment Coalition, National Community Stabilization Trust, National Fair Housing Alliance, NHC, National Urban League, and UnidosUS.
Separately, the National Council of State Housing Agencies (NCSHA) has called for FHFA to rescind the proposed regulatory capital framework because “it would increase mortgage rates, decrease housing affordability, and impair the creation of new housing for low- and moderate-income households.”
“FHFA should restart the rulemaking process with a more holistic approach that considers not only the enterprises’ obligation to facilitate liquidity—which the framework acknowledges—but also their mandates to support financing for affordable multifamily housing and facilitate the availability of single-family mortgage financing nationwide—which the framework all but ignores,” states NCSHA in its letter.
