WASHINGTON – In her two months as acting director of the Federal Housing Finance Agency, Sandra Thompson oversaw a significant shift in regulator's focus, say advocates of affordable housing and referring to her team's guidelines to bolster fair lending and expand access Loan for first-time home buyers.
President Biden appointed Thompson as deputy director of the agency on June 23 after dismissing Mark Calabria as unconstitutional following a Supreme Court ruling.
Calabria – appointed by former President Donald Trump – devoted much of its term in office to getting government-sponsored corporations on their way out of conservatory politics. Under his leadership, the agency finalized a post-preservation capital framework and signed an agreement with the Treasury Department to allow Fannie Mae and Freddie Mac to withhold profits and hold significantly more capital.
However, many expressed concern that Calabria was prioritizing the safety and soundness of the GSEs over the fundamental mission of Fannie and Freddie: making affordable homes possible. These same observers are encouraged by what they see as a fundamental change under Thompson.
"The pace of FHFA announcements is pretty impressive," said Andrew Jakabovics, vice president of policy development for Enterprise Community Partners. "It's only day and night to change priorities from what it used to be as an agency."
Since Thompson took over the helm, the FHFA has eliminated the adverse market fee on most refinanced mortgages, which was put in place to protect Fannie and Freddie from pandemic-related losses, but which also increased the cost of homeowners.
Earlier this month, the FHFA also reached an agreement with the Department of Housing and Urban Development aimed at strengthening fair lending enforcement for the GSEs as well as the Federal Home Loan Banks. Also earlier that month, the FHFA proposed affordable housing targets for Fannie and Freddie, which for the first time included a subcategory covering lending to minority neighborhoods.
David Dworkin, President and CEO of the National Housing Conference, described the action taken by the FHFA under Thompson as "extremely encouraging".
"We desperately need to relax credit standards, but they have to be relaxed in a responsible way that truly embraces the idea of offsetting factors," he said. "I think Director Thompson certainly understands that and that we can responsibly expand the credit box without adding unnecessary or irresponsible risks."
The FHFA also announced this month that Fannie will begin integrating rental payment history into their mortgage signing process from September.
"We've been advocating this for years because tenants need an opportunity to build their credit," said Doug Ryan, interim vice president of policy for Prosperity Now. "Often tenants, especially those of color, but also immigrant communities and others, have non-existent credit files and loan portfolios, and this is an opportunity to build them up."
Taking rental payments into account when checking a prospective borrower's creditworthiness could also be a step towards closing the racial disparities in home ownership rates, Jakabovics said.
“The inclusion [rent payments] is really very powerful, and I think it reflects the reality that there are a lot of people who could [and should] be homeowners and that the system is not necessarily well adjusted to itself adapt the circumstances that people are dealing with now, ”Jakabovics said.
The discrepancy between black and white home ownership is well documented and is even greater today than it was in 1960, before the Civil Rights Act was passed. The U.S. The Census Bureau found that black home ownership was 47% in the second quarter of 2020, compared with 76% for white Americans.
These efforts by Fannie indicate a wider shift in GSEs that has occurred recently, Ryan said.
"I also only see from Fannie and Freddie, somewhat informally, a new force investing and exploring new ways to accomplish their mission," he said.
Dworkin pointed to the FHFA's new leadership as one of the reasons Fannie announced the program, adding that he expected Freddie to follow a similar program soon.
"I think there are two things here," he said. "On the one hand, the innovation itself is important; on the other hand, it is also important that the supervisory authority examines and approves this type of innovation."
Proponents of affordable housing also say they are encouraged by the letter of intent the FHFA reached with HUD earlier this month that will allow the two agencies to share information and coordinate investigations and compliance reviews. While it is still unclear what impact this agreement could have, many agree that it sends a clear message that the FHFA is serious about fair lending.
"While FHFA is not the center of fair housing construction, it has a duty as a regulator to ensure that Fannie and Freddie and their vendor services comply with fair housing and lending laws," said Ryan. "This is a signal that this is important to the new management of the FHFA, and last but not least, quite important."
Under Thompson's leadership, the agency published a policy statement on fair lending in July, asserting that it would not tolerate any illegal discrimination in mortgage lending.
"By and large," Thompson "is clearly concerned about the fact that companies are not buying very much credit to black borrowers and trying to find ways to respond, and I think that has been expressed in a number of ways "said Jesse Van Tol, CEO of the National Community Reinvestment Coalition.
Many referred to Fanny and Freddie's "duty" plans next on the FHFA agenda. Under the Housing and Economic Recovery Act, GSEs have "a duty to serve three specific underserved markets" – prefabricated houses, rural housing, and maintenance of affordable housing – and must make plans on how to meet this requirement.
Fannie and Freddie's 2022-2024 duty plans were unveiled in January under Calabria, and the comment deadline on the plans closed last month. Some in the affordable housing sector are now hoping that the FHFA, under new leadership, will instruct the GSEs to create stronger rosters.
"We think, along with a lot of other people, that they could do a lot more in the three components of the three underserved markets of compulsory service, and I honestly believe Fannie and Freddie think so too," said Ryan.
Van Tol agreed, adding that Fannie and Freddie still have a lot of work to do to expand access to credit, which could be achieved through solid goals for affordable housing and service plans.
“When it comes to the goal of affordable housing or the duty to serve, we hope for an approach that says we have real problems with affordable housing and the role that Fannie and Freddie have played once again.” With some of those issues they by and large no longer matter, and in some cases they may be part of the problem, ”he said.
Ideally, Thompson brings the GSEs back to their core role by "appropriately balancing their job responsibilities and the requirement that they be managed in a secure and sound manner," said Dworkin.
"If the companies are not involved in building this liquidity for the affordable housing market, why is it even there?" He said.