MReport June 2020

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M REPORT | 63 SECONDARY MARKET THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Mnuchin: FHFA Proposal 'Important Step' to Ending Conservatorship Fannie Mae CEO: "Start of an important new chapter" for Fannie Mae. T he Federal Housing Finance Agency (FHFA) announced a proposed rulemaking that estab- lished a new regulatory capital framework for Fannie Mae and Freddie Mac. The proposed rule is a re- proposal of the notice of proposed rulemaking published in July 2018. Comments will be due 60 days after the notice is published in the Federal Register. The FHFA states the proposal remains the foundation of the re- proposal. The enhancements in the new proposal preserve the mort- gage risk-sensitive framework of the 2018 proposal while increasing the quantity and quality of the GSEs. According to the FHFA's proposal, the risk-based capital re- quirement would include require- ments for credit risk, market risk, and operational risk. "The leverage ratio requirements would provide a credible backstop to the risk-based capital require- ments. An Enterprise's capital distributions and employment- based discretionary bonus pay- ments would be subject to limits if the Enterprise does not maintain regulatory capital in excess of the prescribed capital buffer amounts," the document states. The FHFA added that this is a "critical step toward responsibly ending the conservatorships." "This national health crisis has affirmed the importance of the Enterprises' mission to serve the American housing market during good times and bad. When credit dries up, low- and moderate-income households are hurt most. We must chart a course for the Enterprises toward a sound capital footing so they can help all Americans in times of stress," FHFA Director Dr. Mark A. Calabria said. "More capital means a stronger foundation on which to weather crises. The time to act is now." Fannie Mae CEO Hugh R. Frater said the proposed regulatory capital rule marks "the start of an impor- tant new chapter" for Fannie Mae. "These next steps toward our recapitalization and release from conservatorship are more than 10 years in the making, and we thank Director Calabria for his leadership during this process," Frater said. "The re-proposal of this critical rule marks another important milestone in our path out of conservatorship. I thank Director Calabria for his leadership in mov- ing this rule forward," said David Brickman, CEO of Freddie Mac. "As Freddie Mac takes unprece- dented steps to assist homeowners and renters adversely affected by COVID-19, we remain focused on preparing for our responsible exit from conservatorship." Steven Mnuchin, Secretary for the U.S. Department of the Treasury, said he applauds Calabria and the FHFA for their work on this issue. He added es- tablishing regulatory requirements for Fannie Mae and Freddie Mac is a "an important step toward bringing the conservatorships to an end." "Appropriate capitalization of the GSEs will be critical to pro- tecting taxpayers, fostering market discipline, promoting stability in the housing finance system, and ensuring durable consumer access to mortgage credit," Mnuchin said. GSE's 'At the Heart' of Assisting Homeowners, Lenders, Servicers Fannie Mae and Freddie Mac key to keeping industry afloat during pandemic. A report by Bloomberg said while the govern- ment took control of Fannie Mae and Fred- die Mac during the last down- turn, the GSEs are "now at the heart" of the government's effort to assist homeowners, lenders, and servicers during COVID-19. Anthony Sanders, a finance professor at George Mason University, told Bloomberg, "the private market can't save us." "The tides have changed dramatically. Now we realize without Fannie and Freddie, we'd be in a world of hurt, because who else is going to buy these mortgages?" Sanders said. Bloomberg added that govern- ment control of the GSEs allowed Congress a tool to provide economic relief quickly, mostly through forbearance plans where borrowers can delay or make reduced payments. Black Knight reported that delinquent mortgages rose by 1.6 million in April—the largest monthly gain ever recorded. The national delinquency rate nearly doubled to 6.45% from March—the largest single-month increase ever recorded—and nearly three times the previous record for a single month from back in late 2008. "The fact that 70% of the mar- ket is federally backed has made this experience far less gruesome than it could have been," said Julia Gordon, President of the National Community Stabilization Trust to Bloomberg. "As imperfect as it is, we're still in a better place than we were in 2007." The Federal Housing Finance Agency (FHFA) announced fore- closure and evictions supported by the GSE will be extended to June 30. Deadlines for all foreclosure and eviction moratoriums were set to expire on May 17. "During this national health emergency, no one should be forced from their home," FHFA Director Dr. Mark A. Calabria said. "Extending the foreclosure and eviction moratoriums protects homeowners and renters with an Enterprise-backed mortgage and provides certainty for families." This announcement came shortly after the FHFA an- nounced new payment defer- ral options for loans backed by Fannie Mae and Freddie Mac. Borrowers now have the ability to repay their missed payments at the time the home is sold, refinanced, or at maturity. Servicers will begin offering deferral payment options begin- ning July 1, 2020, according to the FHFA.

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