The Federal Housing Finance Agency (FHFA) released its 2015 Scorecard for Fannie Mae and Freddie Mac on Wednesday, outlining the steps the two GSEs are expected to take this year to support the U.S. housing market.
As FHFA Director Mel Watt revealed in his first public speech as the agency's chief, the companies' new direction revolves around three main objectives: maintain, reduce, and build.
"Fannie Mae and Freddie Mac made significant progress toward achieving the goals in FHFA's Strategic Plan for the Conservatorships last year and we look forward to building on that progress in 2015," Watt said Wednesday.
The chief goal, maintain (which accounts for 40 percent of the scorecard), largely focuses on efforts to increase access to mortgages for creditworthy borrowers while still sticking to responsible risk management practices.
Among the goals in that category are instructions for the GSEs to finalize their rep and warranty frameworks (a process started late last year), encourage more participation from smaller lenders, and continue watching for other hurdles to credit access.
Also included on the "maintain" list are instructions to practice loss mitigation strategies by directing eligible homeowners to take advantage of the Home Affordable Refinance Program (HARP) and developing plans to cut down on severely delinquent mortgages in the GSEs' portfolios with loan modifications, short sales, and other actions.
The next step in FHFA's plan, "reduce," outlines expectations for Fannie and Freddie to reduce their own presence in the mortgage market and boost the role of private capital.
Instructions in this category were separate for each GSE: In 2015, Fannie Mae will make credit transfers on reference pools of single-family mortgages with an unpaid principal balance of at least $150 billion, while Freddie Mac is expected to do the same for a balance of $120 billion. The balance requirement for both enterprises will be reviewed and adjusted when needed to reflect market conditions, FHFA said.
Finally, both Fannie and Freddie are expected to work with FHFA and each other to build and test a platform designed for a common security between the two of them.
While FHFA estimates it will still be years before the development of a common securitization platform (CSP), the agency and the GSEs have already made the first steps by establishing a joint venture—called Common Securitization Solutions (CSS)—to oversee the process.
For its part, CSS is tasked with designing the platform, focusing this year on including any functions the GSEs need for their securitization activities and working with them to get input from the public and the mortgage industry.
"These objectives will allow FHFA to work with Fannie Mae, Freddie Mac and Common Securitization Solutions to build a strong, vibrant national housing finance market, which will create new homeownership and rental opportunities for existing and potential borrowers," Watt said.