Letter to the Treasury and FHA on Recommendations Concerning the Senior Preferred Stock Purchase Agreements

The Honorable Janet Yellen
Secretary
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

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

Dear Secretary Yellen and Acting Director Thompson,

The undersigned organizations write to provide recommendations for the U.S. Department of the Treasury (Treasury) and the Federal Housing Finance Agency (FHFA) as they implement – and consider further amendments to – the Senior Preferred Stock Purchase Agreements (PSPAs) with respect to Fannie Mae and Freddie Mac (the Enterprises). These recommendations would improve the health of the housing finance system and align with the stated goals of ensuring that the Enterprises operate in a safe and sound manner while furthering their missions to increase liquidity in support of affordable housing.

Our collective concerns, which previously have been expressed in individual letters from our respective organizations, arise from policy changes incorporated in amendments to the PSPAs that were announced in January 2021.1 We believe several of these policy changes warrant reconsideration due to disruptions they have caused – or have the potential to cause – to the housing market or frictions they have created for borrowers, renters, lenders, servicers, or investors. These policy changes include those related to:

• Limits on single-family loans with multiple higher risk characteristics;
• Limits on single-family loans secured by second homes and investment properties;
• Limits on the use of the Enterprises’ cash windows;
• Limits on multifamily loans; and
• Compliance with a point-in-time regulatory capital framework.

We appreciate the recent steps that both Treasury and FHFA have taken to promote smooth market functioning and assist consumers – including actions related to the implementation of COVID-19 assistance funds for homeowners and renters, as well as the elimination of the Enterprises’ Adverse Market Refinance Fee. We believe the additional steps recommended herein for both the single-family and multifamily markets would further ease ongoing pressures and strengthen the nation’s housing markets. The recommendations outlined below include near-term actions that could be implemented immediately, as well as intermediate-term actions that are more likely to be completed over a slightly longer time horizon.

Download the comment letter to read the full text.