FHFA Issues Final Rule on GSE Allocations to Housing Trust Fund
Yesterday, the Federal Housing Finance Agency (FHFA) released a final rule establishing certain requirements regarding Fannie Mae and Freddie Mac’s contributions to the Housing Trust Fund and the Capital Magnet Fund (the Funds). Specifically, the rule would prohibit Fannie Mae and Freddie Mac from trying to recoup their allocations to the Funds by passing along the costs to loan originators, and sets a framework by which FHFA will enforce this prohibition. The final rule is identical to an interim final rule FHFA proposed in December.
The rule follows FHFA Director Mel Watt’s announcement last December that he was directing Fannie Mae and Freddie Mac to begin storing and making contributions for the Funds. Beginning in 2015, the firms have been required to set aside an amount equal to .042 percent of the unpaid balance on each new single-family, multifamily, or refinance loan they purchase. These contributions were initially authorized by the Housing and Economic Recovery Act of 2008 (HERA), but were suspended before they began when FHFA took Fannie Mae and Freddie Mac into conservatorship.
HERA also contains a provision explicitly prohibiting Fannie Mae and Freddie Mac from trying to offset the costs of their contributions to the Funds by passing them on to those entities that originated the loans that the firms purchase and/or securitize. The final rule effectively implements this provision. The rule also states that FHFA will enforce Fannie Mae and Freddie Mac’s compliance with this prohibition through the same enforcement framework that it uses to enforce the firms’ compliance with their affordable housing goals, which is laid out in the Financial Safety and Soundness Act. This framework provides FHFA with several mechanisms for enforcing the Rule, including the ability to file cease-and-desist measures and impose fines for non-compliance.
While FHFA oversees the contributions to the Housing Trust Fund, it will be administered by HUD. HUD published an interim rule in January establishing regulations that govern its administration and the allocation formula HUD will use to determine state grant amounts.