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FHFA Releases 2019 Scorecard for GSEs

Published on December 19, 2018 by Greg Zagorski
FHFA Releases 2019 Scorecard for GSEs

Earlier today, the Federal Housing Finance Agency (FHFA) released the 2019 Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Solutions (CSS). The scorecard outlines the steps FHFA expects each of the firms to undertake next year to fulfill FHFA’s Strategic Plan for Enterprise Conservatorship, which was first published in 2014. Earlier this year, FHFA released its updated Strategic Plan for Fiscal Years 2018-2022, which builds off the original plan.

As in previous years, the scorecard lays out three core activities Fannie Mae and Freddie Mac will be required to support in 2019: maintaining credit availability and foreclosure prevention activities; reducing taxpayer risk through increasing the role of private capital in the mortgage market; and continuing to build a new common securitization platform for Fannie Mae and Freddie Mac mortgage-backed securities (MBS).

Credit Availability and Foreclosure Prevention Activities

The scorecard instructs each firm to help increase single-family lending to underserved borrowers by continuing its efforts to increase access to credit for non-English-speaking borrowers, conduct market research, modernize the home appraisal process, and support the Neighborhood Stabilization Initiative. Each firm is also expected to prepare for the financial market’s transition away from the London Inter-Bank Offered Rate (LIBOR) and consider how to improve the mortgage servicing market.

FHFA also directs Fannie Mae and Freddie Mac to examine ways to increase credit availability for affordable multifamily housing. FHFA previously announced that new multifamily business for 2019 will be capped at $35 billion for each firm, the same level as 2018. To encourage Fannie Mae and Freddie Mac to support lending for underserved market segments, FHFA will continue to exempt certain loans for affordable multifamily housing from each firm’s lending cap. Loans exempt from the cap include those for Housing Credit properties, small multifamily properties, and other categories listed in the scorecard’s appendix.

Unlike last year’s scorecard, the 2019 Scorecard does not include language directing Fannie Mae and Freddie Mac to consider how they can strengthen their partnerships with state HFAs. However, such language was included in FHFA’s Strategic Plan for 2018-2022, suggesting that it remains a priority for FHFA, Fannie Mae, and Freddie Mac.

Increased Private Capital

The scorecard mandates that Fannie Mae and Freddie Mac increase their use of risk-sharing transactions. FHFA expects both firms to transfer a “meaningful” portion of the credit risk on all newly acquired multifamily mortgages on at least 90 percent of the unpaid principal balance of most newly acquired single-family mortgages. Fannie Mae and Freddie Mac will also be required to examine their liquidity requirements for non-bank seller/servicers to determine if they are accurate.

Common Security and Platform

The scorecard also expects Fannie Mae and Freddie Mac to continue working with FHFA and CSS to develop and implement both a common MBS and the Common Securitization Platform. Freddie Mac started using the platform to sell its securities in 2016. Both firms are expected to have fully adopted the platform and common security by June 2019.