Prior-approval rule for Fannie, Freddie applauded by mortgage industry

Industry comments are generally favorable regarding the Federal Housing Finance Agency's final rule mandating prior approval for the government-sponsored enterprises to introduce new products.

That includes supportive statements from both GSEs.

"Fannie Mae will continue to work closely with FHFA as we develop new products and activities in response to the needs of a dynamic market, provide liquidity for mortgages, and promote affordability and access to credit," a statement from the GSE said. "Fannie Mae is focused on innovating to provide new products and activities that make homeownership possible for diverse borrowers of all income levels in the United States."

Freddie Mac pointed to its 50-year history of creating a safe, sound and streamlined financing process for homebuyers and multifamily borrowers.

"[The] final rule offers clarity about FHFA's submission and approval process for new products and activities," a Freddie Mac spokesperson said. "With this guidance in place, we will continue to pioneer solutions that benefit the housing finance system, support Freddie Mac's safety and soundness, and advance our mission."

A congressional critic, Rep. French Hill, R.-Ark., also praised the new rule. "I thank Director Thompson for finalizing this long overdue rulemaking to establish a more fair and transparent process for the agency to evaluate new activities and products proposed by the Enterprises," he said.

Hill was the lead signatory on a letter sent by House Republicans to Thompson in July urging FHFA to bolster its oversight of Fannie Mae and Freddie Mac. 

"As long as the GSEs remain under government conservatorship and reliant on taxpayer support, FHFA must not allow them to be politicized and engage in 'charter creep' — with or without this rule," Hill said in a statement. "I look forward to seeing the final rule in effect and FHFA continue to enhance its pilot transparency framework."

The Community Home Lenders of America, which in the past has expressed concern that FHFA proposals treat small and mid-sized originators unfairly compared with their larger competitors, is supportive of the new rule.  But their statement had one caveat. 

"Innovation and new product development are essential to Fannie and Freddie operating nimbly in a dynamic mortgage market, so CHLA urges FHFA to monitor over time whether the rules are interfering with that important objective," a statement from the organization said. 

The U.S. Mortgage Insurers praised the regulator, saying it created an objective and transparent process for rolling out pilot programs.

"This will result in proper oversight of the GSEs, ensuring that innovations do not disintermediate other market participants while keeping consumers well served," the USMI statement said. "FHFA's final rule will also promote a robust housing finance system and prudently expand homeownership opportunities by carefully considering the impact new GSE products may have on GSE and non-GSE market participants."

In a January 2021 comment letter, USMI called for the inclusion of pilot programs in the approval process. It wanted the regulator to halt all on-going pilots and existing ones should not be grandfathered in.

However, the final rule set to go into effect 60 days from Dec. 20 is prospective regarding the  reviewing of products. It defines a new activity as one that Fannie Mae or Freddie Mac is not already engaging in at that time.

The final rule hits on a few key points the Mortgage Bankers Association included in its own January 2021 comment letter, a statement from the organization said. That included addressing the MBA's concerns regarding protection of proprietary information in disclosure and reporting, along with requiring a subsequent notice of new activity for a pilot with changes to its duration and volume in order to help prevent what it termed "pilot creep."