FHFA Releases Four-Year Strategic Plan
Written By: Joel Palmer, Op-Ed Writer
The Federal Housing Finance Agency (FHFA) is requesting input on its Strategic Plan: Fiscal Years 2021-2024 released last week.
The plan establishes new goals for FHFA to fulfill its statutory duties, including ending the conservatorships of Fannie Mae and Freddie Mac. Those goals include:
Ensuring safe and sound regulated entities through world-class supervision.
Fostering competitive, liquid, efficient, and resilient (CLEAR) national housing finance markets.
Positioning the agency as a model of operational excellence by strengthening its workforce and infrastructure.
The plan listed the following strategies to end the conservatorships of Fannie and Freddie:
Develop a clear, responsible roadmap that ensures the enterprises have adequate capital, a low-risk, resilient operating environment, and a strong and resilient risk management framework sufficient to fulfill their missions in a range of post-conservatorship scenarios.
Develop a resolution framework for the enterprises and FHFA’s other regulated entities.
Develop a post-conservatorship strategy/framework for Common Securitization Solutions (CSS), a joint venture of Fannie and Freddie formed to design, build and launch the Common Securitization Platform.
Provide FHFA stakeholders with accounting and auditing expertise and analyses of capital, corporate, financial, and regulatory matters for post-conservatorship scenarios.
Ensure post-conservatorship continuing review of enterprise internal control over financial reporting and public financial reports.
"The goals and milestones laid out in the plan ensure that that FHFA's supervision is strong, well executed and fulfills all statutory requirements, including ending the conservatorships of the enterprises responsibly," said FHFA Director Mark Calabria.
The plan listed a number of risks to achieving plan goals, including the COVID-19 pandemic. The plan states that the enterprises and FHFA have have taken action to support the mortgage market in response to the COVID-19 crisis, which have “bolstered house prices and helped housing market activity recover after the initial decline in March and April.”
But the plan also cautions that “the enterprises currently lack the capital to withstand a serious housing downturn.”
It was noted in the plan document that the enterprises own or guarantee about $6 trillion in mortgages, which accounts for nearly half of all U.S. mortgage debt. That gives them a combined leverage ration of more than 200 to 1, compared with an average ratio of 12 to 1 for large financial institutions.
“That is why FHFA has been working to enable the enterprises to build the loss-absorbing capital that they need to fulfill their countercyclical mission to provide liquidity to the mortgage market in times of stress.”
Input on the Plan is due by October 5 and should be submitted online at https://www.fhfa.gov/AboutUs/Contact/Pages/Request-for-Information-Form.aspx
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
