FHFA will ‘review’ role of Federal Home Loan Banks: Thompson


WASHINGTON — The director of the Federal Housing Finance Agency said the agency will “review” the structure and role of federal home loan banks in the U.S. housing market, the first possible steps of a long-awaited reform.

FHFA Director Sandra L. Thompson said in her opening remarks to lawmakers during an oversight hearing of the House Financial Services Committee that the agency will soon begin a formal review of the Federal Home Loan Bank System. The government sponsored companies that were founded in the 1930’s have drawn scrutiny as theirs The core business in the housing market has declined amid historic levels of liquidity in the banking system.

Sandra Thompson, director of the Federal Housing Finance Agency, told lawmakers the FHFA will conduct a comprehensive review of the role and organization of the Federal Home Loan Bank System.

Bloomberg News

“As we approach Home Loan Banks’ 100th anniversary, “now is a good time to rethink their approach to ensure they continue to meet the needs of today and tomorrow,” Thompson said. “We plan to engage a variety of stakeholders over the coming months as we complete this review and, of course, welcome input from members of Congress.”

In her written testimony, Thompson said the FHFA will conduct “a 90-year retrospective and forward-looking analysis” of the Home Loan Bank System. She also said the agency will hold “public listening sessions across the country” to “examine everything from the banks’ membership base, operational efficiency and effectiveness to more fundamental issues of mission, purpose and organization.”

Thompson received a warm welcome from Democrats on the House Financial Services Committee in her first appearance since being confirmed by the Senate earlier this year. The committee chair, Maxine Waters of California, said the Biden nominee took “decisive steps to move the FHFA to a new path forward” by eliminating policies introduced under the Trump administration that “made it more expensive for families to buy or refinance their homes.”

Thompson’s Trump-era predecessor, former FHFA director Mark Calabria, was repeatedly raised during Wednesday’s hearing. Republicans expressed support for the policies Calabria had instituted before him ousted by the Biden administrationwhile Democrats blew up his tenure, arguing his policies have made it harder for some Americans to achieve home ownership.

Ranking member Patrick McHenry, the North Carolina Republican, criticized Thompson for this Undo Calabria’s changes the capital requirements framework introduced by the FHFA bank-like capital requirements for the government-sponsored companies Fannie Mae and Freddie Mac.

“Rather than working to maintain stability, the FHFA has weakened our home finance system by reducing taxpayer protections and pushing new risky systems,” McHenry said. “For example, the agency removed the capital and liquidity rule designed to ensure GSEs can weather an economic downturn. That worries us.”

McHenry’s comments echoed concerns he expressed in a letter co-signed by fellow Republican French Hill of Arkansas in early July. The two lawmakers asked Thompson to ensure that the government of the FHFA promotes corporations not expand into new areas of finance.

Thompson, formerly a regulator at the Federal Deposit Insurance Corp., said changes in capital requirements made by the FHFA under her leadership would “protect taxpayers while also requiring companies to hold a significant amount of capital.”

“The FHFA will continue to promote sustainable and equitable access to credit in a responsible manner without compromising safety and soundness,” Thompson said in her written statement.

Several Republicans questioned the FHFA’s progress on the release of Fannie Mae and Freddie Mac from the conservatory. At one point, Thompson said the FHFA’s combined capital target between Fannie and Freddie was about $300 billion under the current framework, but other factors would play into whether and when the GSEs would be brought back under private control.

When asked by Rep. Blaine Luetkemeyer of Missouri whether hitting the $300 billion threshold would be enough to exempt GSEs from conservatorship, Thompson said there were “other factors that need to be considered,” including one Exploring the political risks associated with institutions that have significant exposure to Fannie and Freddie stocks.

Thompson also indicated during Wednesday’s hearing that the FHFA would welcome an increase in its authority to directly oversee third-party service providers for GSEs. When asked by Illinois Democratic Rep. Bill Foster if that agency would support the agency’s mission, Thompson said the FHFA had requested such powers “for a number of years,” noting that federal bank regulators already had significant powers over third parties Offerer.

“In fact, when I came to the FHFA from the FDIC, I was very surprised that we didn’t have that authority,” Thompson said. “The services provided to our regulated entities are really important; they could compromise the safety and soundness of our regulated businesses.”


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