Waters to Calabria: No ‘midnight rules’ on GSEs
Monday, December 14, 2020
House Financial Services Committee Chairwoman Maxine Waters has asked Federal Housing Finance Agency (FHFA) Director Mark Calabria to halt all efforts to raise the capital requirements for Fannie Mae and Freddie Mac and stop all efforts to release them from conservatorship.
Waters (D-Calif.) recently sent a letter to Calabria urging him to fully engage with Congress.
She also requested the agency cease and desist from finalizing any “midnight rules” or other administrative actions until President-elect Joseph R. Biden is sworn into office Jan. 20, 2021 and his administration can review them.
“I believe that it is entirely inappropriate for you and your agency to be focusing on releasing the enterprises from conservatorship during the pandemic with the assistance of a lame duck Treasury secretary,” Waters said in the letter. “At the very least, the Congress and the American public deserve transparency from you.
“On behalf of current homeowners, renters, potential homebuyers, and more than 19 million prospective millennial homeowners, I urge you to fully engage with Congress by testifying before our committee and to immediately halt your efforts to raise the enterprises’ capital requirements and to release them from conservatorship. You should instead focus on ensuring that renters and homeowners are receiving the help they need during this pandemic. I look forward to working with you to find a mutually agreeable time for you to testify before the committee.”
Waters wrote that her staff requested Calabria testify before the committee this month, but he chose to make himself unavailable until sometime next Congress.
Waters said it was critical Calabria testify before the committee as soon as possible considering the FHFA’s Nov. 18 release of the Enterprise Regulatory Capital Framework Final Rule.
“Just a few months ago, you testified before our committee and reassured members that the process for releasing the enterprises from conservatorship would be ‘process driven, not calendar driven,’ ” she said. “However, finalizing a new capital framework and making significant changes to the senior preferred stock purchase agreements or otherwise making plans for a release in the middle of a national pandemic and recession appears to be purely ‘calendar driven’ as your time as the director of FHFA and that of the Trump administration is winding down.
“You have a duty to be transparent with Congress regarding any steps you are taking to implement such a major decision that could seriously compromise the stability of the housing market and overall national economy.”
Waters noted the economic downturn has more than 2.8 million homeowners in forbearance, with 3.8 million homeowners estimated to be in some stage of delinquency.
“Further, as this turmoil rages on, affecting borrowers of color disproportionately, your agency’s response to the pandemic has been criticized as falling short,” she added. “And yet, rather than focusing on responding to the pandemic, FHFA has been focused on finalizing a rule establishing a new, complex capital framework for the enterprises with little analysis and that is expected to disrupt historically low interest rates, increase the cost of lending for borrowers, and push millions of credit-worthy borrowers out of affordable lending options.”
The final rule makes certain changes to the proposed rule published June 30.
As required by the proposed rule, an enterprise must maintain more than 4 percent tier 1 capital to avoid restrictions on capital distributions and discretionary bonuses.
FHFA made three notable changes to the risk-based capital requirements:
Increased capital relief for credit risk transfers;
Reduced capital requirements for single-family mortgage exposures subject to COVID-19 related forbearance; and
Increased the exposure level risk-weight floor for single-family and multifamily mortgage exposures to 20 percent.
