FHFA Releases 2017 Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Platform

FHFA Releases 2017 Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Platform
Posted: 12/16/2016
The Federal Housing Finance Agency (FHFA) released yesterday the 2017 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 finalized in 2014.

The scorecard lays out three core activities that Fannie Mae and Freddie Mac will be required to support in 2017: 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 Fannie Mae and Freddie Mac to help increase single-family lending to underserved borrowers through market research, pilot initiatives, improving alternative credit scoring models, and housing counseling services. It will also require Fannie Mae and Freddie Mac to undertake efforts to increase access to credit for non-English-speaking borrowers, develop new loss mitigation options, and reduce the amount of older delinquent loans in their portfolios. Both firms must also engage in a multiyear study of the challenges and opportunities facing the mortgage servicing market.

FHFA also directs Fannie Mae and Freddie Mac to examine ways to increase credit availability for affordable multifamily housing. Both firms’ new multifamily business for 2017 will be capped at $36.5 billion, the same cap as 2016 (this year’s cap was initially $31 billion, but FHFA increased the cap twice to accommodate a larger-than-expected multifamily lending market). 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 firms’ 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.

Increased Private Capital

The scorecard mandates that both 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 at least 90 percent of the unpaid principal balance of most newly acquired single-family mortgages, and 80 percent of the unpaid principal balance of newly acquired multifamily loans. Fannie Mae and Freddie Mac will also be required to examine their capital standards for private mortgage insurers and determine whether they should be adjusted.

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. The scorecard also requires CSS, a joint-venture established by Fannie Mae and Freddie Mac, to facilitate the development of the common security and platform. Freddie Mac started using the platform to sell its securities last month.

spacer.cfm?tracking_id=33357763547&jid=35991721

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s