WASHINGTON — The director of the Federal Housing Finance Agency said the agency would “reexamine” the structure and role of the Federal Home Loan banks in the U.S. housing market, the first possible steps of long-sought reform.
Testifying during an oversight hearing of the House Financial Services Committee, FHFA Director Sandra L. Thompson told lawmakers in her opening remarks that the agency would soon begin a formal review of the Federal Home Loan Bank System. The government sponsored enterprises, created in the 1930s, have drawn scrutiny as their
“As we near the 100th anniversary" of the Home Loan banks, "now is a good time to reexamine their approach to ensure they continue to serve the needs of today and tomorrow,” Thompson said. “We plan to engage a variety of stakeholders in the coming months as we complete this review and, of course, welcome the input of members of Congress.”
In her written testimony, Thompson said the FHFA would “conduct a 90-year lookback, as well as a forward-looking analysis of" the Home Loan Bank System. She also said the agency would hold “public listening sessions throughout the country” and “examine everything from the banks’ membership base, operational efficiency, and effectiveness, to more foundational questions about mission, purpose, and organization.”
Thompson received a warm welcome from Democrats on the House Financial Services Committee in her first appearance since being Senate-confirmed to her role earlier this year. Committee Chair Maxine Waters of California said that the Biden appointee had “taken critical steps to set the FHFA on 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 brought up repeatedly during Wednesday’s hearing. Republicans expressed support for policies introduced by Calabria before he was
Ranking Member Patrick McHenry, the North Carolina Republican, criticized Thompson for
“Instead of working to maintain stability, FHFA has weakened our housing finance system by reducing taxpayer protections and pushing new risky schemes,” McHenry said. “For example, the agency rescinded the capital and liquidity rule designed to ensure that the GSEs could weather an economic downturn. We're concerned about that.”
McHenry’s remarks echoed concerns he raised earlier in July in a letter co-signed by fellow Republican Rep. French Hill of Arkansas. The two lawmakers urged Thompson to ensure that the FHFA’s government sponsored enterprises
Thompson, formerly a regulator at the Federal Deposit Insurance Corp., said changes made to capital requirements by the FHFA under her leadership would “protect taxpayers while still requiring the enterprises to hold a substantial amount of capital.”
“FHFA will continue to promote sustainable and equitable access to credit in a responsible manner that does not compromise safety and soundness,” Thompson said in her written testimony.
Several Republicans asked about the FHFA’s progress toward releasing Fannie Mae and Freddie Mac from conservatorship. At one point, Thompson said that while the FHFA’s combined capital goal between Fannie and Freddie was roughly $300 billion under the current framework, other factors would also play into whether and when the GSEs would be released back into private control.
Asked by Missouri Rep. Blaine Luetkemeyer whether meeting the $300 billion threshold would be enough to release the GSEs from conservatorship, Thompson said there were “other factors that need to be taken into consideration,” including an examination of policy risks associated with institutions which have significant exposure to Fannie and Freddie stock.
Thompson also suggested during Wednesday’s hearing that the FHFA would welcome an expansion of its authority to directly supervise third-party service providers for GSEs. Asked by Democratic Rep. Bill Foster of Illinois whether that authority would support the agency’s mission, Thompson said the FHFA had been asking for such powers “for a number of years,” noting that the federal bank regulators already had significant authority over third-party providers.
“In fact, when I got to the FHFA from the FDIC, I was very surprised that we didn’t have that authority,” Thompson said. “The services that are provided to our regulated entities are really important; they could impact safety and soundness of our regulated entities.”
