Freddie Mac – The Real Estate Roundtable

Real Estate Industry Urges FHFA to Avoid Linking New Regulations to GSE Financing

Posted on August 5, 2023October 27, 2023 by Trey Jackson

The Roundtable and an industry coalition recently submitted separate comments in response to a Request for Input from the Federal Housing Finance Agency (FHFA) on multifamily properties with mortgages backed by Fannie Mae and Freddie Mac (the Enterprises). The letters encourage the FHFA to remain focused on the Enterprises’ stated mission “to serve as a reliable source of liquidity and funding for housing finance and community investment.” The industry comments also raise concerns about the FHFA imposing counterproductive property restrictions, such as rent control, on multifamily properties backed by loans from the Enterprises. (Roundtable comments, July 28 and Industry coalition comments, July 31)

Industry Solutions

The Roundtable’s comments encouraged the FHFA—the regulator and conservator of the Enterprises—to focus on its pivotal role in America’s housing finance market by maintaining Enterprise support of the multifamily affordable housing market, particularly for low-income households. The letter noted that the imposition of counterproductive restrictions on Enterprise-backed financing and private rental housing providers would lead to less investment and development in the affordable housing market, especially during this time of market uncertainty.

The Roundtable letter expressed support for measures to:
- Enhance the Low-Income Housing Tax Credit (LIHTC);
- Support initiatives that explicitly tie federal funding of infrastructure and other federal funding for “green” initiatives to local assurances to improve exclusionary zoning;
- Reduce regulatory costs, including a broad range of fees, standards and other requirements imposed at different stages of the development and construction process; and,
- Stabilize the GSEs to ensure appropriate liquidity in mortgage markets.

The Roundtable’s July 28 letter also noted the important role of institutional investors as a source of capital for affordable housing. The comments emphasized how FHFA should not disincentivize this important source of capital for expanding the housing infrastructure.

Coalition Comments

The real estate coalition’s July 31 letter reiterated that the best way to help the nation’s renters find affordable housing is to keep the Enterprises focused on financing housing creation. The real estate organizations note that rental housing is already a heavily regulated industry that should not be subject to a one-size-fits-all set of new “protections” that conflict with the unique housing needs of individual markets.
National Multifamily Housing Council President Sharon Wilson Géno said, “When we have market dynamics like we do now, where we have really high interest rates and difficulty accessing capital, the GSEs are even more important. If they start putting mandatory restrictions and rent caps on their products, people are going to go back into that private market at higher cost, and that’s going to increase rent and decrease affordability.” (PoliticoPro, Aug. 1)

This week, Senate Banking Chair Sherrod Brown (D-OH) and 17 Senate Democrats also responded to the FHFA by supporting rent increase limits and other tenant measures on properties with federally backed loans from the GSEs. (Senate Banking Committee letter, Aug. 1)

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Fannie, Freddie Regulator to Propose New Affordable Housing Rules, Takes Steps Away from LIBOR and Toward Privatization of GSEs

Posted on February 15, 2020October 27, 2023 by Trey Jackson

The federal regulator of Fannie Mae and Freddie Mac – the Government Sponsored Enterprises (GSEs) who own or guarantee $5.6 trillion in single and multifamily mortgages – will propose new affordable housing requirements and duty-to-serve plans this year.

Federal Housing Finance Agency Director Mark Calabria, above, told Politico this week that the regulator’s Division of Research and Statistics will first study how effective the current rules have been, which expire at the end of 2020. “I don’t know whether they’ve (the requirements) made a difference in getting anybody into a home who wouldn’t have been otherwise; I mean unless you have a strong evaluative function, how do you know whether what you’re doing makes a difference?” Calabria said. (PoliticoPro, Feb. 10)
Calabria also discussed the timeline for when Fannie and Freddie will stop acquiring adjustable rate mortgages tied to the London Interbank Offered Rate (LIBOR) as loans will begin to be tied to the Secured Overnight Financing Rate (SOFR) as the global benchmark for interest rates. FHFA’s steps away from LIBOR will include:

* New language will be required for single-family Uniform Adjustable Rate Mortgage (ARM) instruments closed on or after June 1, 2020;

* All LIBOR-based single-family and multifamily ARMs must have loan application dates on or before September 30, 2020 to be eligible for acquisition; and,

* Acquisitions of single-family and multifamily LIBOR ARMs will cease on or before December 31, 2020.

“These steps represent important milestones in the Enterprises’ transition away from LIBOR to a more robust reference rate. We will continue to monitor exposure to LIBOR and ensure the Enterprises manage the risks associated with the transition in a safe and sound manner,” said Calabria. (FHFA news release, Feb. 5)
FHFA also continues to take steps toward recapitalizing Fannie and Freddie before returning the GSEs to private ownership after their $190 billion government bailout in 2008. Calabria announced on Feb. 3 that FHFA has selected Houlihan Lokey Capital, Inc. as a financial advisor to assist in the development and implementation of a roadmap to responsibly end the GSEs conservatorships.
Houlihan Lokey will consider business and capital structures, market impacts and timing, and available capital raising alternatives, among other items as outlined in a previously published Statement of Work.
“Hiring a financial advisor is a significant milestone toward ending the conservatorships of the Enterprises,” Calabria said. “The next major milestone for FHFA is the re-proposal of the capital rule, which will happen in the near future.” (FHFA news release, Feb. 3)
Director Calabria spoke during The Real Estate Roundtable’s Jan. 28, 2020 State of the Industry Meeting in Washington. He addressed his agency’s need to responsibly privatize Fannie and Freddie while ensuring sufficient private capital is in place to protect taxpayers, along with access to affordable rental housing.

The Roundtable wrote to the leadership of the Senate Committee on Banking, Housing and Urban Affairs in September 2019 regarding reform of the nation’s house finance system. The letter notes the Treasury Department’s constructive proposal for both legislative and administrative reforms to the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, and urges both Treasury and the FHFA to work with Congress to end conservatorship through comprehensive, bipartisan, legislative reforms. (Roundtable GSEs comment letter, Sept. 9, 2019)

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Trump Administration Allows Fannie, Freddie to Retain Earnings in Move Toward Privatization

Posted on October 5, 2019October 27, 2023 by Trey Jackson

Fanne Mae and Freddie Mac logos

The Trump Administration took a key step on Sept. 30 to release Fannie Mae and Freddie Mac from conservatorship by allowing them to retain a total of $45 billion in earnings annually. (Wall Street Journal, Sept. 30)

Fannie and Freddie received $191 billion in government support during the financial crisis, but since entering conservatorship Sept. 6, 2008, they have paid the Treasury $292 billion in dividends, according to research from Keefe, Bruyette & Woods. (Reuters, March 27)
Under their modified governing agreements, Fannie Mae will now be allowed to retain $25 billion and Freddie Mac $20 billion annually (Bloomberg, Sept. 30)
The Treasury Department and Federal Housing Finance Agency (FHFA) jointly announced the modifications to the Government-Sponsored Enterprises’ (GSEs) Preferred Stock Purchase Agreements (PSPAs) – designed in the wake of the financial crisis to ensure Fannie and Freddie maintain positive net worth, meet outstanding obligations and continue providing liquidity to the multi-trillion dollar mortgage market. (Fannie Mae Capital Agreement and Freddie Mac Capital Agreement)
“These modifications are an important step toward implementing Treasury’s recommended reforms that will define a limited role for the Federal Government in the housing finance system and protect taxpayers against future bailouts,” said U.S. Treasury Secretary Steven T. Mnuchin. (Treasury news release, Sept. 30)
FHFA Director Mark Calabria – Fannie and Freddie’s chief regulator – stated, “FHFA commits to working with Treasury in the coming months to amend the share agreements and further advance broader housing finance reform. These reform goals include limiting the government’s role in housing finance, increasing marketplace competition, focusing on affordable housing, and sustainable homeownership. The status quo is not an option. Now is the time to act.”
The Washington Post reported on Oct. 2 that Fannie, Freddie, and the Federal Housing Administration guarantee 33 percent more debt than before the housing crisis, more than at any other point in U.S. history.
In Congress, Senate Banking Committee Chairman Mike Crapo (R-ID) on Feb. 1 released an outline for reforming the nation’s housing finance system, including the GSEs (Crapo Statement and Housing Reform Outline, Feb. 1). At the end of March, Crapo’s committee held two days of hearings on reforming the multi-trillion dollar housing finance markets. (Roundtable Weekly, March 29)

The Real Estate Roundtable and 27 industry organizations on March 1 submitted principles for reforming the GSEs. The letter emphasized that compelling evidence must show the private market is capable of an expanded role before efforts are made to reduce the GSEs’ current housing finance footprint. “Ultimately, we believe any reform, be it administrative or legislative, must seek to further two key objectives: 1) preserving what works in the current system, while 2) maintaining stability by avoiding unintended adverse consequences for borrowers, lenders, investors, or taxpayers.” (Roundtable Weekly, March 1)

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Senate Confirms Mark Calabria as FHFA Director Overseeing Fannie Mae and Freddie Mac

Posted on May 13, 2019October 27, 2023 by Trey Jackson

The Senate yesterday confirmed Mark Calabria, previous chief economist to Vice President Mike Pence, as director of the Federal Housing Finance Agency (FHFA) – the federal regulator overseeing Fannie Mae, Freddie Mac and the multi-trillion dollar Federal Home Loan Bank System.

Calabria will now have broad influence over reshaping the role of the Government Sponsored Enterprises (GSEs) brought under government conservatorship during the financial crisis.
Senate Banking Committee Chairman Mike Crapo (R-ID) said on the Senate floor yesterday that Calabria “committed to working with me, and other members of this body, to reach a comprehensive solution on ending the conservatorship of Fannie and Freddie, once and for all. He agrees with me, and many others, that action on housing finance reform is the prerogative of Congress, and that after over a decade of conservatorship, it is long overdue.” (Politico, April 4)
Sen. Crapo and President Trump last week launched separate efforts aimed at reforming the multi-trillion-dollar financial market for single-family and multifamily mortgages, including the GSEs’ Fannie Mae and Freddie Mac. Chairman Crapo’s recent housing reform outline proposes to return the GSEs to private control. (Roundtable Weekly, Feb. 8)
Sen. Crapo will be a featured speaker at next week’s Spring Roundtable Meeting in Washington.
President Trump last week released a presidential memo directing “the Secretary of the Treasury and the Secretary of Housing and Urban Development to craft administrative and legislative options for housing finance reform.” (Wall Street Journal, March 27)
President Trump also aims to end the GSEs’ conservatorship, “promote competition in the housing finance market … create a system that encourages sustainable homeownership and protects taxpayers against bailouts.” The memo supports the preservation of the 30-year fixed-rate mortgage. ( White House announcement, March 27)
A coalition of 23 national real estate organizations, including The Real Estate Roundtable, sent a letter supporting Calabria’s confirmation this week to Senate leadership. (Coalition confirmation support letter, April 1)

The Real Estate Roundtable and 27 industry organizations last month submitted principles for reforming the GSEs. (Roundtable Weekly, March 1)

Senate Banking Committee and President Trump Launch Efforts to Address Housing Finance Reform, Including GSEs

Posted on March 29, 2019October 27, 2023 by Trey Jackson

Senate Banking Committee Chairman Mike Crapo (R-ID) and President Trump this week launched separate efforts aimed at reforming the multi-trillion-dollar financial market for single-family and multifamily mortgages, including the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac.

Senate Banking Committee Chairman Mike Crapo (R-ID) held hearing this week on reforming the multi-trillion-dollar housing finance markets.

Two days of hearings before the Senate Banking Committee concluded Wednesday, with twelve witnesses testifying about Chairman Crapo’s recent housing reform outline – a proposal that would return the GSEs to private control. (Roundtable Weekly, Feb. 8)

Crapo stated during the hearing, “This outline sets out a blueprint for a permanent, sustainable new housing finance system that: protects taxpayers by reducing the systemic, too-big-to-fail risk posed by the current duopoly of mortgage guarantors; preserves existing infrastructure in the housing finance system that works well, while significantly increasing the role of private risk-bearing capital; establishes several new layers of protection between mortgage credit risk and taxpayers; ensures a level playing field for originators of all sizes and types, while also locking in uniform, responsible underwriting standards; and promotes broad accessibility to mortgage credit, including in under-served markets.” (Senate Banking Committee, Day One Testimony and Day Two Testimony)

The Real Estate Roundtable and 27 industry organizations on March 1 submitted principles for reforming the (GSEs).

Following the hearings, President Trump released a presidential memodirecting “the Secretary of the Treasury and the Secretary of Housing and Urban Development to craft administrative and legislative options for housing finance reform.” (Wall Street Journal, March 27)

President Trump aims to end the GSEs’ conservatorship, “promote competition in the housing finance market … create a system that encourages sustainable homeownership and protects taxpayers against bailouts.” The memo also calls for the preservation of the 30-year fixed-rate mortgage. (White House announcement, March 27)

The GSE’s received $191 billion in government support during the financial crisis, but since entering conservatorship, they have paid the Treasury $292 billion in dividends, according to research from Keefe, Bruyette & Woods (Reuters, March 27)

The Real Estate Roundtable and 27 industry organizations on March 1 submitted principles for reforming the (GSEs). The coalition’s letter was sent to Acting Federal Housing Finance Agency (FHFA) Director Joseph Otting and Washington policymakers days after the Senate Banking Committee advanced the nomination of Mark Calabria as FHFA Director. (Roundtable Weekly, March 1)

Calabria is awaiting full Senate confirmation, which is expected soon.

Industry Coalition Promotes GSE Reform Principles; Senate Banking Committee Advances New FHFA Director

Posted on March 1, 2019October 27, 2023 by Trey Jackson

The Real Estate Roundtable and 27 other industry organizations today submitted principles for reforming the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac, which underpin the multi-trillion-dollar financial market for single-family and multifamily mortgages. (GSE Reform Coalition letter, March 1)

The Real Estate Roundtable and 27 other industry organizations today submitted principles for reforming the Government-Sponsored Enterprises (GSEs).

“We believe that comprehensive legislative reform, including an end of conservatorship, is ultimately necessary in order to codify structural changes that ensure safety and soundness and provide the certainty needed for private capital to establish a more reliable presence in housing finance,” according to the comments.
The letter emphasized that compelling evidence must show the private market is capable of an expanded role before efforts are made to reduce the GSEs’ current housing finance footprint. “Ultimately, we believe any reform, be it administrative or legislative, must seek to further two key objectives: 1) preserving what works in the current system, while 2) maintaining stability by avoiding unintended adverse consequences for borrowers, lenders, investors, or taxpayers.”
Fannie and Freddie recently announced they will pay a combined $4.7 billion in dividends to the U.S. Treasury Department. The government took control of the two GSEs in September 2008 during the financial crisis. (Reuters, Feb. 14)
The GSE coalition reform principles were sent to Acting Federal Housing Finance Agency (FHFA) Director Joseph Otting and Washington policymakers days after the Senate Banking Committee advanced the nomination of Mark Calabria as FHFA Director. Calabria, currently chief economist to Vice President Mike Pence, would lead the agency that oversees the GSEs. A vote to approve Calabria now moves to the full Senate, where it is expected to pass. (Housing Wire, Feb. 26 and Senate Banking Committee nomination hearing, Feb. 14)
The coalition states in today’s letter that FHFA should establish policies that ensure a continuation or expansion of:

The coalition states that FHFA should establish certain policies to support the continuation or expansion of a robust housing market.
- A liquid national market with broad and fairly-priced access to affordable credit and improved infrastructure for the single-family secondary market;
- Support for strong and sustained liquidity in the multifamily rental market;
- Equal secondary market access and pricing for all lenders, regardless of size or volume; and
- The sustainable transfer of appropriate credit risk to the private sector.

The letter also advocates that principles governing any potential administrative reforms to the GSEs should be guided by the potential impact on borrowers, taxpayers, and market structure dynamics. Any reform that would meaningfully alter the GSEs’ market presence-single-family, multifamily, or both-should also seek to maintain and enhance the stability and liquidity of the housing finance system. (GSE Reform Coalition letter, March 1)
Roundtable President and CEO Jeffrey DeBoer added, “Housing finance reform should support the GSE’s overall mission-ensure Americans across a broad range of income levels have access to a diverse supply of housing.”

Senate Banking Committee Chairman Mike Crapo (R-ID) on Feb. 1 released an outline for reforming the nation’s housing finance system, including the GSEs. (Crapo Statement and Housing Reform Outline, Feb. 1 / Roundtable Weekly, Feb. 8)