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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 FHFA Rule Brings Greater Transparency to GSEs Introduction of new Final Rule will introduce public disclosure requirements to the Enterprise Regulatory Capital Framework and foster risk management practices. T he Federal Hous- ing Finance Agency (FHFA) has issued a Final Rule that amends the Enterprise Regulatory Capital Framework (ERCF) by intro- ducing new public disclosure requirements for Fannie Mae and Freddie Mac (the government- sponsored enterprises). The FHFA's requirements in- clude quantitative and qualitative disclosures related to risk man- agement, corporate governance, capital structure, and capital requirements and buffers under the standardized approach. "By allowing market partici- pants to assess key information about the Enterprises' risk pro- files and associated levels of capi- tal, this final rule will promote transparency and encourage sound risk management practices at the Enterprises," said FHFA Director Sandra L. Thompson, who was officially confirmed as FHFA head. "The rule published today will foster financial stabil- ity at the Enterprises and in the broader housing finance market." The FHFA proposed these amendments to improve market discipline and encourage sound risk management practices at the GSEs by ensuring that market participants have access to sufficient information with which they can assess a GSE's material risks and capital adequacy and make in- formed investment decisions. Public disclosures that are clear, compre- hensive, useful, consistent over time, and comparable across each GSE will facilitate such analyses, and contribute to the safety and sound- ness of the GSEs as entities, thus decreasing risk to U.S. taxpayers. The Housing and Economic Recovery Act of 2008 amended the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to require that the FHFA establish, by regulation, risk-based capital requirements for the GSEs to ensure that each enterprise operates in a safe and sound manner, maintaining sufficient capital and reserves to support the risks that arise in the operations and management of the enterprises. "By allowing market par- ticipants to assess key informa- tion about the Enterprises' risk profiles and associated levels of capital, the final rule will promote transparency, increase the amount of information available to the public, and encourage sound risk management practices at the Enterprises," said the Rule. The FHFA's Final Rule adapts the public disclosure requirements in the U.S. banking framework to reflect the ERCF's standardized ap- proach, combining elements from the U.S. banking framework's stan- dardized and advanced approach- es. While the final rule implements disclosure requirements for the ERCF's standardized approach only, the FHFA may consider additional disclosure requirements related to the advanced approaches in the future. According to the Final Rule, quarterly quantitative disclosures and annual qualitative disclosures must be provided by the GSEs no later than the end of the next calendar quarter. The GSEs will publish their first public disclo- sure reports under the Final Rule in Q1 of 2023 on their respective websites. This timeframe allows the GSEs to establish the internal reporting and governance func- tions necessary to fulfill these disclosure requirements, and will minimize duplicative report- ing by aligning the schedule of annual qualitative disclosures with the Securities and Exchange Commission's (SEC) reporting schedule for Form 10-K. Ginnie Mae Guarantees $50B-Plus in MBS in April April issuance adds more than $19 billion to Ginnie Mae's overall portfolio, on pace to cross the $2.2 trillion mark in May. G innie Mae guaranteed nearly $52 billion in mortgage-backed securi- ties (MBS) in April 2022, supporting affordable homeown- ership and rental units for more than 186,500 households during the month. Ginnie Mae has seen con- tinued strength in purchase market activity at insuring agencies driven by the Federal Housing Adminis- tration (FHA) and Department of Veterans Affairs (VA) lending, and a decrease in rate term refinance activity, given the rapid increases to mortgage rates over the period. "April issuance added $19 billion to the overall portfolio this month, the strongest growth we have seen in quite some time," said Ginnie Mae President Alanna McCargo. "Despite the rapidly changing housing market dynamics, we are also on pace to cross the $2.2 trillion threshold in May." Ginnie Mae's April issuance includes $49.29 billion of Ginnie Mae II MBS and $2.38 billion of Ginnie Mae I MBS, which includes approximately $2.25 billion of loans for multifamily housing. As of April 30, Ginnie Mae's total outstanding principal balance was $2.199 trillion, an increase from $2.182 trillion in March 2022 and $2.105 trillion in April 2021. "Total new mortgage origination volume is expected to slow due to rising mortgage rates and home affordability challenges, yet we see a strong MBS issuance volume of more than $50 billion that continues to help ensure support for first-time homebuyers and those seeking af- fordable rental housing during this cycle," added McCargo. "The rule published today will foster financial stability at the Enterprises and in the broader housing finance market." —Sandra L. Thompson, FHFA Director