ICYMI: Fannie Mae, Freddie Mac, FHA news this week

February 18, 2022 4:11 PM

Government-related players in the mortgage market this week announced new developments in automation as a key nomination reached an impasse, and higher rates dimmed lending estimates.

Collectively, these add to signs mortgage lenders will be heading down a rougher road this year as refinancing estimates have dropped following the unusual boom over the past 24 months. Forecasts now call for more notable reductions in rate-related incentives to get loans than previously. And while housing agencies are readying operational improvements that aim to support the purchase market, making up for some of the lost affordability homebuyers are facing, some of those efforts may take longer to gear up for than others.

Political deadlock related to filling housing-agency leadership vacancies will likely be a source of some of those delays. While progress has been made, with the recent confirmation of Ginnie Mae’s president, the latest week’s news suggests that due to broader political developments, getting consensus on the Federal Housing Finance Agency’s nominee, like the Federal Housing Administration’s, may not be as easy.

Nevertheless, the past week also has made it clear that Ginnie Mae and the FHFA’s government-sponsored enterprise charges, Fannie Mae and Freddie Mac, will forge ahead with some new automation for lending even while the agency’s director remains an acting role and the GSEs remain undercapitalized. And while the FHA may move relatively slower, as it typically has, that agency is making progress as well.

Read on for more details in our recap of developments at the FHFA, Fannie Mae, Freddie Mac, and Ginnie Mae in the past week.

Confirmation of FHFA’s Sandra Thompson, Fed nominees stalled

Objection to Sandra Thompson’s leadership of the FHFA has been limited, but her nomination is grouped with Federal Reserve approvals that Republicans this week denied a quorum on for a committee vote. At issue in that development was the nominee for the Fed’s vice chair for supervision Sarah Bloom Raskin, a former Fed board member. Republicans have criticized a position Raskin took while serving on the board of a fintech, Reserve Trust, after leaving a position as deputy secretary of the Treasury in 2017. At issue in the opposition on Raskin are allegations by Sen. Cynthia Lummis, R-Wyo., that Raskin’s former position as a Fed governor was used as influence in getting Reserve Trust’s master-account application approved by the Federal Reserve Bank of Kansas City. Both Raskin and Reserve Trust’s founder have denied the allegations.

Fannie’s results improved, but pressure to raise capital levels grew…

Net worth doubled, and earnings were up on both a yearly and quarterly basis, but Fannie Mae executives noted that capital levels still could use some work given the new regulatory framework that's come into play for the GSEs this year. Fannie is already far shy of the statutory minimum and the new standards are stricter, executives noted. They also noted that the rate of growth in its book of business will play a big role in its ability to keep up with new capital requirements both it and competitor Freddie Mac will be subject to this year.

…And the GSE’s loan production projections underwent downward revision

Fannie Mae also lowered its estimates for 2022 mortgage volume, indicating that it expects rising interest rates to remove $172 billion from its earlier numbers for the full year, reducing its potential for loan purchases. Other forecasts, like industry data and technology provider Black Knight’s, also registered a reduction in the market’s potential to generate originations due to the reduction in rate incentives. Black Knight estimates the incentive to refinance has fallen dramatically in the last month and a half, with just 3.8 million loans remaining from what previously was 11 million at the outset of the year.

Freddie Mac rolled out new tech to help with borrower data validation

In a partnership with data validation provider FormFree, Freddie Mac announced that it’s offering what it termed the “first automated assessment of direct deposit information,” with the ability to fulfill both verification of income and assets. The move brings Freddie closer to a goal both the GSEs and multiple technology providers have been working toward for some time in which they hope to consolidate the different types of borrower data verification into as few touch-points as possible, streamlining the process for all stakeholders while simultaneously improving the integrity of the information used to underwrite loans.

FHA delayed its mandatory date for electronic appraisal implementation

The Federal Housing Administration had originally planned to have all lenders submitting e-appraisals through its FHA Catalyst system’s module by March 14 of this year, but the mandatory date was extended to a full year later. Loans where the appraisal was originally delivered through legacy technology prior to March 14, 2023 will have until April 17, 2023 to use the newer system’s electronic appraisal delivery module. “These revised dates were implemented in response to industry feedback that FHA received regarding the transition timeline announced,” the FHA noted in an information bulletin.

Ginnie Mae made a move to improve its appeal with ESG investors

Mortgage-bond guarantor Ginnie Mae, an arm of the Department of Housing and Urban Development that helps industry issuers package FHA loans into securities, added a “green” status field to multifamily disclosures this week. That could be a step toward improving the appeal of its securities for investors in the market for environmental, social and governance bonds and is in line with HUD’s Climate Action Plan. It also could help borrowers obtain improved rates for loans that fund affordable housing. “This new pool disclosure represents progress in our ongoing effort to enhance the value proposition of investing in Ginnie Mae mortgage-backed securities,” President Alanna McCargo said in a press release. Ginnie previously added green disclosures for single-family loans.