Fannie Mae-No Politics (FNMA)

[IL Padrino]

Crapo's outline.

https://www.banking.senate.gov/imo/media/doc/Housing%20Reform%20Outline.pdf

Housing Reform Outline
Guarantors
a. Guarantors will be private companies.
b. The primary business of guarantors will be to guarantee the timely repayment of
principal and interest to investors of eligible mortgages that are securitized
through a securitization platform operated by Ginnie Mae.
i. Guarantors will be permitted to (i) provide guarantees on eligible
mortgages that are securitized by primary market participants or issuers;
and (ii) buy eligible mortgages from the primary market through a cash
window and guarantee and securitize them through a securitization
platform operated by Ginnie Mae.
ii. Guarantors will be able to hold mortgages in portfolio only to the extent
that such portfolio holdings are incidental to the business of securitizing
and guaranteeing mortgage backed securities.
c. No guarantor will be able to guarantee more than [XX] percent of all outstanding
guaranteed eligible mortgages.
d. Fannie Mae and Freddie Mac will be private guarantors.
i. The multifamily businesses of Fannie Mae and Freddie Mac will be sold
and operated as independent guarantors.
e. Insured depository institutions will not be permitted to be guarantors.
f. Guarantors will not be permitted to offer volume-based discounts on the
guarantee fee or other terms.
g. Guarantors will be required to maintain (i) a minimum statutorily required capital
ratio of [XX] percent to total assets (including asset equivalents of any offbalance
sheet exposures); and (ii) additional capital requirements established by
the Federal Housing Finance Agency (FHFA).
i. In addition, FHFA will be permitted to require guarantors to engage in
approved credit risk transfers (CRT). FHFA may take the quantity and
quality of CRT into account when setting capital requirements for a
guarantor, but every guarantor will be required to remain above the
statutory minimum leverage ratio.
h. Credit box: In order to qualify as an “eligible mortgage” (i.e., a mortgage that a
guarantor can buy, securitize, and/or guarantee) (i) the borrower must provide a
down payment of at least [XX] percent; (ii) the outstanding principal balance will
not be able to exceed 80 percent of the value of the property unless the borrower
has private mortgage insurance as currently required by GSEs; (iii) the loan will
be required to meet requirements that are substantially similar (as determined by
FHFA by regulation) to the Qualified Mortgage requirements; and (iv) the value
of the mortgage will not be permitted to exceed loan limits set by FHFA.
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Regulation of Guarantors
a. FHFA’s structure will be changed so that it is run by a bi-partisan board of
directors instead of a single Director.
b. FHFA will charter, regulate, and supervise guarantors.
c. FHFA will be required to establish prudential standards that include (i) leverage
requirements in addition to statutorily required leverage requirements; (ii) riskbased
capital requirements (if appropriate); (iii) liquidity requirements; (iv)
overall risk management requirements; (v) resolution plan requirements; (vi)
concentration limits; and (vii) stress tests.
d. FHFA will be permitted to establish standards of approval for CRT structures.
Guarantors may only use CRT structures approved by FHFA.
e. FHFA will maintain existing resolution authorities to resolve an insolvent
guarantor. Guarantors will be allowed to fail.
f. FHFA will have authority to require a guarantor to divest certain assets or
operations if (i) FHFA determines that a guarantor guarantees more than [XX]
percent of all outstanding guaranteed mortgages; or (ii) the guarantor constitutes a
grave threat to the financial safety, soundness, or stability of the U.S. financial
system.
g. FHFA will be required to approve guarantors’ pricing.
Ginnie Mae
a. Ginnie Mae will guarantee timely repayment of principal and interest on
securities that receive credit enhancement from guarantors that are approved and
regulated by FHFA.
b. Ginnie Mae will operate a securitization platform.
c. Ginnie Mae will provide a catastrophic government guarantee at the security-level
to cover tail-end risk, backed by the full-faith and credit of the United States.
d. Ginnie Mae will operate a mortgage insurance fund (MIF) with a reserve ratio of
[XX] percent of total amount of outstanding securities guaranteed by Ginnie Mae.
The MIF will be funded through insurance premiums paid by guarantors.
e. If the MIF is depleted and draws on Treasury, guarantors would be charged higher
insurance premiums to pay back taxpayers and rebuild the MIF reserves to the
required reserve ratio.
Transition
a. No guarantor will be permitted to have more than [XX] percent of all outstanding
guaranteed eligible mortgages within [XX] years after enactment of the
legislation.
b. All guarantors will be required to be fully capitalized within [XX] years after
enactment of the legislation.
c. Technology and infrastructure being developed as part of the Common
Securitization Platform may be sold or transferred to Ginnie Mae.
d. FHFA, with the consent of Treasury, will have the authority to postpone deadlines
if FHFA submits a report to Congress, and the Chair of FHFA and the Secretary
of Treasury both agree and testify before Congress as to why a delay is necessary.
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Affordable Housing
a. Current affordable housing goals and duty-to-serve requirements will be replaced
with a new Market Access Fund, which will provide grants, loans, and credit
enhancement to address the homeownership and rental housing needs in
underserved and low-income communities.
b. The Housing Trust Fund, Capital Magnet Fund, and Market Access Fund will
collectively be funded through an annual assessment of 10.0 basis points of the
total annual loan volume guaranteed by each guarantor.