WASHINGTON — The Treasury Department and Federal Housing Finance Agency have agreed to suspend certain unpopular changes former Trump officials made in January to the government’s oversight of Fannie Mae and Freddie Mac while the Biden administration reviews the revisions.
Those changes agreed to in the waning days of the Trump administration and promulgated by former Treasury Secretary Steven Mnuchin and former FHFA Director Mark Calabria allowed the government-sponsored enterprises
“This suspension will provide FHFA time to review the extent to which these requirements are redundant or inconsistent with existing FHFA standards, policies and directives that mandate sustainable lending standards," acting FHFA director Sandra Thompson said in a statement.
The FHFA and Treasury are specifically suspending the restrictions in the amendments on “high-risk" loans, multifamily lending, use of the cash window and the purchase of second homes and investment properties. The FHFA said it would review the requirements and consult with Treasury “on any recommended revisions.”
The cap on the amount of "high-risk" loans that Fannie Mae and Freddie Mac can purchase drew particular ire from stakeholders after the amendments to the PSPAs were unveiled. The new policy defined such mortgages based on loan-to-value and debt-to-income ratios, as well as a borrower's credit score. But many in the industry and elsewhere argued the changes would disproportionately hurt people of color and make it harder to access loans.
Many also took issue with restrictions in the new agreements that limit the size of transactions completed through the GSEs' cash window. Smaller lenders can use the window to gain liquidity through higher-volume sales.
Under the January agreement, Fannie and Freddie were permitted to retain all of their earnings until they meet the requirements laid out in
However, the FHFA added in a statement that the agency is reviewing the November capital framework “and expects to announce further action in the near future.”
In a letter to Thompson outlining the suspension, Treasury Secretary Janet Yellen said that the suspension of the requirements would expire in one year and six months after Treasury notifies the GSEs.
Senate Banking Committee Chair Sherrod Brown applauded the decision to suspend the requirements, adding that the Trump administration had “rushed through haphazard changes impacting homeowners, renters and the entire housing system.”
“I applaud Acting Director Thompson and Secretary Yellen’s decision to pause and review these changes so we do not unintentionally restrict access to safe, affordable housing for homeowners and renters,” he said in a statement.
But the announcement drew criticism from Sen. Pat Toomey, R-Pa., the top Republican on the Banking Committee.
"Relaxing restrictions on risky mortgages when housing supply is near a record low risks overheating an already-hot market," Toomey said in a statement. "Unfortunately, we know how this ends: wiped-out homeowners, and another wave of taxpayer bailouts.”
