FHFA Directives Reshape GSE Policies
The Federal Housing Finance Agency (FHFA) has recently streamlined its directives regarding the operations of Government-Sponsored Enterprises (GSEs), particularly concerning radon policy and climate risk management.
Radon Policy Changes
In November 2022, the FHFA mandated that GSEs implement new radon policies specifically for multifamily properties. However, in a recent order by FHFA Director Bill Pulte, these requirements have been deemed inconsistent with the priorities of the agency. Pulte noted that the additional regulations were contributing unnecessary time, expenses, and operational complexities to Enterprise transactions.
Rescinding Climate Risk Guidance
On a related note, Pulte instructed the Federal Home Loan Banks (FHLBanks) to withdraw a 2024 bulletin that addressed guidelines for managing climate-related risks. He characterized climate risks as “transverse risks,” which are effectively encompassed by existing risk management frameworks within the FHLBank System. This decision was made in pursuit of reducing operational costs linked to redundant frameworks.
Adjustments to Borrower Requirements
Furthermore, the recent directive also rescinded previous mandates requiring Fannie Mae and Freddie Mac to impose specific minimum criteria for rental payment flexibility and lease notices in multifamily properties. This adjustment is part of an effort to simplify the underwriting process for borrowers.
Termination of Special Programs
This week also witnessed the FHFA’s termination of certain guidance, including the Unfair, Deceptive, or Abusive Acts or Practices (UDAP) and Special Purpose Credit Programs (SPCPs). Although these programs accounted for roughly 15,000 mortgages purchased by the GSEs in 2023, they had gained traction among lenders aiming to enhance lending in historically underrepresented communities.
Workforce Reduction and Department Closures
In a significant organizational shift, last week’s announcements included a 10% reduction in the FHFA workforce, leading to the closure of two departments: the Research and Statistics Division and the Division of Public Interest Examination (DPIE). This restructuring reflects ongoing changes within the agency following its reassessment of priorities.
Conclusion
These recent changes by the FHFA signal a major shift in the operational landscape for GSEs, emphasizing efficiency and alignment with the agency’s overarching objectives. As these policies evolve, stakeholders within the housing finance sector will need to stay informed and adapt to the new directives.