Letter to FHFA re: Enterprise Regulatory Capital Framework Proposal

The Honorable Sandra Thompson
Acting Director
Federal Housing Finance Agency
400 7th Street, SW Washington, DC 20219

Dear Acting Director Thompson,

The American Bankers Association (ABA) appreciates this opportunity to comment on the Federal Housing Finance Agency’s (FHFA) proposal to amend the Enterprise Regulatory Capital Framework (ERCF) by refining the prescribed leverage buffer amount (PLBA or leverage buffer) and credit risk transfer (CRT) securitization framework for Fannie Mae and Freddie Mac (the Enterprises or GSEs).

Both PLBA and CRT play important roles in the prudential regulation of the Enterprises. The proposed refinements may have significant impacts on the management of the Enterprises, the continued availability of mortgage credit to the primary market, the protection of taxpayers, and the interplay between the Enterprises and the private mortgage market, both now and in a post-conservatorship environment. With those impacts in mind, we offer the following comments reflecting the views and insights of our members, which we hope will be useful in further refining and finalizing the proposal.

Summary of Comments

Reducing the risks held by the Enterprises – both during the ongoing conservatorship and in a post-conservatorship environment, is one of the most important responsibilities of the FHFA. This task is made more complex by the fact that the tools available and how they can best be deployed will differ under changing circumstances, not least of which include what ultimate form the Enterprises take in a post conservatorship environment. The current proposal’s effort to revise and refine the PLBA, CRT and other tools reflected in the current proposal are important steps, but need further refinement, supported by additional research, and the development of metrics to better determine the degree to which tools such as CRT should be deployed.

ABA remains neutral on the question of the appropriate post conservatorship corporate structure of the Enterprises. For purposes of these comments, we presume there will not be legislation enacted in the near term altering the shareholder ownership status that existed prior to conservatorship, and that is the structure to which they will eventually return.

Download the comment letter to read the full text.