|Earlier in June, several housing industry groups sent Federal Housing Finance Agency (FHFA) Director Mel Watt and Treasury Secretary Jack Lew identical letters asking them to maintain their current policy regarding Fannie Mae’s and Freddie Mac’s capital standards until Congress passes comprehensive housing finance reform. The Mortgage Bankers Association, the National Association of REALTORS®, the American Bankers Association, the National Association of Home Builders, and the National Housing Conference signed the letters.
Fannie Mae and Freddie Mac are currently required to send Treasury all business income they generate at the end of each fiscal quarter, as a condition of their conservatorship agreements with the federal government. While those agreements allow Fannie Mae and Freddie Mac to retain assets to serve as "capital buffers" to guard against any temporary losses, the agreements stipulate that Fannie Mae and Freddie Mac must reduce these buffers each year and completely eliminate them by January 1, 2018.
In the letters, the groups lament what they see as a "piecemeal approach" to reforming the housing finance system. They argue that amending just the capital buffer requirements is counterproductive to the ultimate goal of preventing another housing crisis in that it detracts from efforts to comprehensively reform Fannie Mae and Freddie Mac. The groups contend that comprehensive reform, passed by Congress, is the only way to "fix the structural flaws that led to the breakdown of the housing finance system" and "protect taxpayers, preserve access to credit, and ensure a stable housing finance system."
The message from these housing industry groups is starkly different than that of letters sent to Mel Watt and Jack Lew last week by legislators and industry stakeholders, which called for the regulators to amend the capital buffer provisions for Fannie Mae and Freddie Mac. NCSHA previously wrote about those letters here.