What do the recent FHFA shifts mean for mortgage lenders?

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The last few months at the Federal Housing Finance Agency and by extension Fannie Mae and Freddie Mac, have been an immense period of change and upheaval under the guidance of Bill Pulte. At the heart of the fray, lenders are wondering what the policy plays will mean for their day-to-day lives.

Pulte, who officially took office in March, expressed support for President Donald Trump's approach to eliminating "waste, fraud and abuse" across the federal government during his confirmation hearing the previous month and touted a similar approach if he were appointed to lead the FHFA.

"Are we using the money as wisely as we can?" Pulte said during the hearing. "I think now having a housing and mortgage person in charge of it, we look forward to, if confirmed, going in and seeing where that money is being spent, and making sure that as many homes are being built as possible through these funds."

Time has proven that deregulation and cost cutting have indeed been the approach adopted by Pulte, who has unwound special purpose credit program offerings at Fannie Mae and Freddie Mac, shuttered Fannie's "Repair All" strategy for real-estate owned properties, overhauled the boards of both government-sponsored enterprises and more.

This month, new updates out of the FHFA include the firing of more than 100 employees for allegedly allowing fraudulent behavior and other unethical conduct to occur, the debut of a mortgage fraud tip line and promises to crack down on fraud through the agency's Suspended Counterparty Program.

"In President Trump's housing market, there is no room for fraud, mortgage fraud, or any other deceitful act that can jeopardize the safety and soundness of the housing industry," Pulte said in a press release.

Read more: Senate Republicans urge Pulte to take more actions

Lenders are also keeping a close eye on the possibility of the GSEs being released from conservatorship among other policy moves, with expectations for the change to be made sometime in the near but not immediate future.

Experts with the CRE Financial Council told National Mortgage News that the release would create the need for a vital balancing act between the provision of liquidity and affordability in the housing markets and the fueling of market development, which is easier said than done.

"Even under conservatorship, or even not under conservatorship, it is kind of closely tied to the government, and you don't necessarily want to crowd out private capital there too," David McCarthy, CREFC's managing director and chief lobbyist and head of legislative affairs, said.

Read more: FHFA's Bill Pulte shakes up agency with social media push

Below are insights and explanations on the recent FHFA regulatory changes and what they mean for the mortgage industry at large.

Al Drago/Bloomberg

Pulte starts dismantling DEI at FHFA, GSE cost-cutting could be next

Bill Pulte, the newly appointed director of the FHFA, has wasted little time pulling back on the agency's diversity, equity and inclusion initiatives — programs he has touted as nonsense.

"Consulting contracts that waste money and other DEI nonsense [are] being stripped away," Pulte wrote in a post to X on April 7. "Now, Fannie Mae and Freddie Mac can finally work on things that make housing more affordable for Americans!"

Pulte announced his decisions to end the FHFA's Diversity and Inclusion Examination Rating System as well as diversity and data collection requirements for Federal Home Loan Banks and their Office of Finance boards of directors respectively via his account on X on April 4.

Read more: Pulte targets DEI at FHFA, hints at GSE cost-cutting

Andrew Harrer/Bloomberg

FHFA rearranges Freddie Mac board of directors, assigns audit role

Grace Huebscher, a former executive at Capital One Multifamily Finance who has been on Freddie Mac's board of directors since November 2017, resigned from her role effective March 24.

Details from the GSE's Securities and Exchange 8K filings on March 28 stated that Huebscher chaired Freddie Mac's Risk Committee and was also a member of its Compensation and Human Capital, Executive and Operations and Technology committees. 

Following her departure, the FHFA named Michael Parrott, founder and chief executive of 480th Consulting, to the entity's board as a non-executive director and Huebscher's successor effective March 28. 

Christopher Herbert, who was most recently chair of Freddie Mac's Mission and Housing Sustainability Committee, also resigned from the board of directors effective March 19. He was succeeded by David Farbman, who is also CEO of the Michigan-based healthcare technology provider Healthrise.

Read more: FHFA replaces Freddie Mac board member, assigns audit role

Ting Shen/Bloomberg

Would the FHFA actually be able to lower the conforming loan limit?

Despite FHFA Director Bill Pulte's adamant statements that the agency has "no plans to do anything" when it comes to the conforming loan limit, industry experts aren't convinced that lowering the threshold is entirely off the table.

The measure has been brought up before as part of a broader move to unwind the conservatorship of government-sponsored enterprises like Fannie Mae and Freddie Mac, but there are lingering doubts as to whether or not the FHFA has the ability to lower the CLL.

"From a populist political standpoint it would make sense their footprint would be smaller, not bigger," Eric Hagen, managing director at BTIG, told National Mortgage News. "The easiest way for the GSEs to do that, the bluntest way for them to effect that change would be to lower the CLL."

Read more: Is the FHFA planning to lower the conforming loan limit?

Al Drago/Bloomberg

SPCPs are out at Fannie Mae, Freddie Mac. What does it mean?

Following new marching orders from FHFA Director Bill Pulte, Fannie Mae and Freddie Mac are prohibited from getting involved in special purpose credit programs.

In a March 25 post on X, wherein he shared the memo saying "the current level of support for SPCPs is inappropriate for regulated entities in conservatorship," Pulte ordered that both GSEs must dismantle any SPCPs supported by Fannie and Freddie. 

Data from the FHFA's 2023 Housing Mission report showed that Fannie Mae was able to pick up 921 loans with more than $5 million in down payment or closing cost assistance offered to borrowers through its SPCP program known as HomeReady First. Freddie Mac acquired 2,472 loans with roughly $4 million in down payment or closing cost assistance through its program, BorrowSmart Access.

Read more: What FHFA's ban on SPCPs mean for lenders, borrowers

Andrew Harrer/Bloomberg

The impact of FHFA Pulte's UDAP advisory pullback on lenders

Like DEI and SPCP efforts, FHFA Director Bill Pulte is rolling back direct oversight of unfair and deceptive acts and practices, while also removing renter requirements for multifamily mortgages.

The policy plays to remove the UDAP oversight and renter requirements were a welcomed addition to the market for lenders, many of whom viewed the rental framework, which was originally delayed to May 31, as beyond the purview of the FHFA. 

"In order to reduce potential conflict or confusion over interpretation of UDAP provisions, U.S. Federal Housing FHFA has determined that the UDAP Advisory Bulletin should be rescinded and not applied to its regulated entities," Pulte said in a March 24 memo. 

Read more: FHFA's UDAP advisory rollback: What it means for lenders