WASHINGTON – In a response to the Notice of Proposed Rulemaking published by the Federal Housing Finance Agency (FHFA) in May, the National Housing Conference (NHC) joined a broad group of 14 housing and civil rights groups in a comment letter calling on the agency to revise its Enterprise Regulatory Capital Framework for Fannie Mae and Freddie Mac. “The proposed capital rule conflicts with the GSEs’ charter mission by treating the GSEs as banks. As a result of this approach, the rule would unnecessarily increase the cost of mortgage credit with a disproportionate impact on low- to moderate-income borrowers and borrowers of color,” the letter states.
The group has urged FHFA to revise the proposed rulemaking to “comply more appropriately with the GSE’s mission” and offered the following recommendations:
- Refrain from adopting bank capital rules for the GSEs;
- Count a portion of guarantee fee revenue as capital for risk-based capital requirements;
- Treat properly discounted credit risk transfers (CRT) as a component of required credit risk capital;
- Eliminate the punitive stability capital buffer and the countercyclical capital buffer;
- Lower the leverage ratio to the alternative proposal from the 2018 proposed rule of 1.5% for trust assets and 4% for retained portfolio; and
- Regulate the GSEs as utilities to promote affordability and more equitably serve low- to moderate borrowers and families of color, as well as to promote safety and soundness of the GSEs.
“The proposed rule fails to appropriately balance the mission of the GSEs and their safety and soundness,” said NHC President and CEO David M. Dworkin. “The levels of capital and the leverage ratio recommended in the proposed rule would disrupt housing markets and significantly raise the cost of homeownership. In the middle of an unprecedented pandemic and the worst recession since the Great Depression, now is not the time to restrict credit or alter the fundamental infrastructure of the housing economy,” Dworkin said.
The letter sent on Aug. 31 was signed by Center for Responsible Lending, Consumer Federation of America, Leadership Conference on Civil and Human Rights, NAACP, National Association of Hispanic Real Estate Professionals, National Association for Latino Community Asset Builders, National Association of Real Estate Brokers, National CAPACD, National Community Reinvestment Coalition, National Community Stabilization Trust, National Fair Housing Alliance, NHC, National Urban League and UnidosUS.
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About NHC: The National Housing Conference has been defending the American Home since 1931. Everyone in America should have equal opportunity to live in a quality, affordable home in a thriving community. NHC convenes and collaborates with our diverse membership and the broader housing and community development sectors to advance our policy, research and communications initiatives to effect positive change at the federal, state and local levels. Politically diverse and nonpartisan, NHC is a 501(c)3 nonprofit organization.