ABA Comment to FHFA on the re-proposed capital rules for Fannie Mae and Freddie Mac

The Honorable Mark Calabria
Director
Federal Housing Finance Agency
400 7th Street, SW
Washington, DC 20219

Dear Director Calabria,

The American Bankers Association (“ABA”) appreciates this opportunity to comment on the Federal Housing Finance Agency’s (“FHFA” or “the Agency”) re-proposal of capital standards for Fannie Mae and Freddie Mac (“the Enterprises” or “GSEs”).

The re-proposal revises and expands upon the version proposed in 2018, upon which ABA submitted significant comments. While we believe the re-proposal addresses some concerns raised by ABA and others with regard to the previous proposal, the re-proposal raises concerns of its own, particularly with regard to the implications for the primary market and our members’ continued ability to sell loans to the GSEs in the revised GSE marketplace implied by the re-proposal. Where the previous proposal was speculative in nature, intended only to become applicable once Congress had acted to remove the GSEs from conservatorship, the re-proposal is more directive in nature, and suggests a foundation upon which a reformed GSE market can be constructed, potentially through regulatory action. As such, the re-proposal may be viewed as more consequential. With that in mind, we think it appropriate to focus our comments on the implications for the primary market, and more specifically for our members’ ability to sell loans to the GSEs in a reformed system governed by the proposed capital rules. Therefore, while we offer a short critique of the re-proposal’s capital framework and offer suggestions intended to help improve it, the bulk of our comments will focus on the future direction and environment implied by the re-proposal and the impact on our members’ who originate and sell mortgages to the GSEs. Key among our recommendations is that FHFA needs to provide more clarity about the post-conservatorship role that it expects the GSEs to play vis a vis other market players, and to provide more data to explain the choices made in setting particular capital standards.

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