Last year, the Federal Housing Finance Agency (FHFA) released its 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac, in which the FHFA announced its strategic goals to “Maintain, Reduce, and Build.” The FHFA has now issued its first Progress Report to announce how Fannie Mae and Freddie Mac worked toward those goals in 2014.
In pursuit of the FHFA’s first strategic goal, to “MAINTAIN, in a safe and sound manner, foreclosure prevention activities and credit availability for new and refinanced mortgages to foster liquid, efficient, competitive, and resilient national housing finance markets,” Fannie Mae and Freddie Mac have made significant strides, including the following:
- The Representation and Warranty Framework now notifies lenders directly when a borrower makes no more than two 30-day-late payments in a 36-month period or when a loan satisfies a quality control review, relieving lenders of certain underwriting obligations;
- Streamlined Modification is now available to borrowers more than 720 days delinquent, and borrower incentives have been increased for deed-in-lieu transactions in certain states;
- Compensatory fees assessed against servicers who fail to comply with state foreclosure deadlines have been temporarily suspended in certain states, and the monthly aggregate invoice threshold has been increased to $25,000;
- Purchase guidelines now allow creditworthy borrowers who can afford a mortgage, but not a substantial down payment and closing costs, to obtain a mortgage with a three-percent down payment;
- The Neighborhood Stabilization Initiative (NSI) is being implemented in pilot programs in the City of Detroit and in Cook County, Illinois, in order to continue developing home retention solutions and post-foreclosure strategies in the hardest hit areas; and
- Fannie Mae and Freddie Mac have implemented several financing initiatives designed to support underserved segments of the multifamily market.
Regarding the FHFA’s second goal, to “REDUCE taxpayer risk through increasing the role of private capital in the mortgage market,” Fannie Mae and Freddie Mac accomplished several significant achievements in 2014, including:
- Executed credit risk transfers on single-family mortgages with an Unpaid Principal Balance (UPB) of over $340 billion;
- Developed risk-transfer programs that access capital in insurance and reinsurance markets by providing coverage at the pool level by a diversified group of counterparties;
- Reduced their retained portfolios by $131 billion in order to shift credit, asset liquidity, and interest rate risks to private investors;
- Developed new Mortgage Insurance master policies and eligibility requirements; and
- Conducted studies regarding the adoption of additional types of credit risk-transfer structures in the multifamily housing business and increasing the amount of credit risk transferred in the current risk transfer structures.
Fannie Mae and Freddie Mac made significant progress in 2014 toward FHFA’s third goal, to “BUILD a new single-family securitization infrastructure for use by the Enterprises and adaptable for use by other participants in the secondary market in the future,” including the following:
- Developing technology and operational infrastructure of the Common Securitization Platform (CSP);
- Testing aspects of the CSP, including integration with Fannie Mae and Freddie Mac;
- Establishing a software development and testing environment and related information security and risk management and control policies, procedures, and processes;
- Developing the security issuance, registration, and settlement capabilities of the CSP; and
- Continuing to develop the Uniform Mortgage Data Program (UMDP), which will implement uniform data standards for single-family mortgages.
These accomplishments and more are detailed in the Progress Report. The FHFA welcomes public input on the current progress made by Fannie Mae and Freddie Mac toward the FHFA’s strategic goals. Comments can be emailed to ConservatorshipStrategicPlan@fhfa.gov.