The Federal Housing Finance Agency (FHFA) has announced the re-proposal of minimum financial eligibility requirements for Fannie Mae and Freddie Mac seller/servicers. This update by the FHFA will strengthen, and provide transparency and consistency of, required capital and liquidity for seller/servicers with different business models.
A seller/servicer must meet or exceed minimum financial requirements to become an approved seller/servicer for the government-sponsored enterprises (GSEs)—Fannie Mae and Freddie Mac. The minimum financial requirements are not, by themselves, measures of adequacy. The GSEs may institute requirements beyond the minimum financial requirements for certain seller/servicers due to situations including, but not limited to, overall complexity or other evidence of heightened risk embedded in the business model or financial condition.
The eligibility requirements are not regulatory requirements, and a seller/servicer that does not wish to do business with the GSEs is not required to meet them. The GSEs do not regulate seller/servicers but, as a matter of prudent risk management, they consider possible risk exposure from contractual relationships with seller/servicers and assess, monitor, and take appropriate actions to address the risks to which they are exposed in their business relationships.
"In an ongoing commitment to the safety and soundness of our housing finance system, the GSEs must consider risk exposure from their contractual relationships with seller/servicers and assess, monitor, and take appropriate actions to address the risks to which they are exposed in their business relationships with third parties," said FHFA Acting Director Sandra L. Thompson.
A key improvement from the minimum financial requirements established in 2015 is that the re-proposed financial requirements differentiate between the servicing of Ginnie Mae mortgages and the servicing of GSE mortgages.
Additionally, the FHFA has incorporated feedback from the Agency's 2020 proposal, as well as lessons learned from market events in reaction to the global COVID-19 pandemic. This proposal also reflects coordination with other federal agencies.
“We [the Mortgage Bankers Association] are especially pleased that, in several key areas, FHFA took industry comments into consideration when drafting the proposal,” said MBA President and CEO Bob Broeksmit, CMB. “This is a critically important framework to get right given the vital role independent mortgage banks (IMBs) play in serving the needs of LMI and minority borrowers. Given the focus of this administration on expanding homeownership to underserved borrowers, it is important that the capital, liquidity, and net worth standards are properly calibrated to mitigate risk, but not excessive to the point where they will increase costs or reduce access for borrowers. MBA looks forward to commenting on this re-proposal, as well as working with all policymakers and stakeholders to ensure sustainable access to affordable mortgage credit for borrowers."
FHFA is seeking input on these requirements for 60 days via email at [email protected], and anticipates finalizing them in the second quarter of 2022. Most of the requirements will be effective six months after they are finalized, and some will be implemented over longer periods of time.