The Federal Housing Finance Agency on Monday announced a new rule that would require Fannie Mae and Freddie Mac to provide advance notice to FHFA of new activities and obtain prior approval before launching new products.
The rule, which was announced by FHFA Director Mark Calabria at the Mortgage Bankers Association’s annual meeting, “establishes revised criteria for determining whether a new activity requires notice to FHFA and for determining if that activity is a new product that merits public notice and comment.”
“The proposed rule will enhance the safety and soundness of the secondary mortgage market by ensuring the Enterprises adhere to their statutory missions,” Calabria said. “This proposed rule is an important step as the Agency works to end the Enterprises’ conservatorships.”
The Federal Housing Finance Agency placed Fannie Mae and Freddie Mac under conservatorship in September 2008 amid the housing crisis.
The proposed rule’s requirements would also outline the process for FHFA review of a new activity and the timelines for approving a new product, including issuing a public notice and requesting public comment about a potential new product.
In his speech to MBA, Calabria explained the rationale:
“FHFA is obligated to ensure Fannie and Freddie stay focused on their core mission and do not stray into business the market already serves well. Feedback from those on the ground helps us hold this line.
“This rule will help clarify the post-conservatorship housing finance market. And it will establish a process that allows stakeholders and the public to remain engaged in shaping the future of the housing finance market as it develops.
“The Housing and Economic Recovery Act of 2008 requires Fannie and Freddie to provide FHFA notice before undertaking a new activity or offering a new product. FHFA issued an interim final rule implementing these requirements in 2009.
“But that process has been little used during the conservatorships. FHFA’s new proposed rule retains the key concepts from the 2009 rule, while clarifying the definitions of new activities and products. We also streamlined the notice and review process.
“Under the proposed rule, after an Enterprise submits a completed notice of a new activity, FHFA has 15 calendar days to determine if the new activity is a new product that needs public notice and comment. If FHFA does not determine that it merits public notice and comment within 15 calendar days, the new activity can proceed.
“If FHFA determines that the new activity is in fact a new product, we will publish a notice soliciting comments for a 30-day period. We then make a decision on approval or non-approval within 30 days of the comment period ending. All these timelines are set in law.
“This process only needs to occur once for each approved new product. For example, Fannie can offer a new product that is identical to or substantially similar to one for which Freddie already received approval – or vice versa.
“In such cases, Fannie would simply need to give FHFA a 15-day advance notice with a description of the product and an explanation if it is substantially similar.
“Importantly, the process established by this proposed rule will ensure that stakeholders like MBA and your members will have reliable, transparent opportunities to comment on new developments at the Enterprises. This is especially important when Fannie and Freddie are pursuing new lines of business.”