The Federal Housing Finance Agency published a rule Tuesday that requires Fannie Mae and Freddie Mac to provide advance notice of new activities and obtain approval prior to launching new products.
"The final rule clarifies how FHFA will conduct assessments of new activities and products proposed by the Enterprises," the agency's director, Sandra Thompson, said in a press release. "Enterprise activities can have significant effects on the mortgage market, consumers, and industry stakeholders, and today's rule further refines FHFA's process to ensure activities continue to serve the Enterprises' mission while maintaining high standards of safety and soundness."
A notice of the proposed rulemaking was first published by the FHFA on Nov. 9, 2020, and received 17 comments, the agency said. The final rule goes into effect 60 days after publication and will replace an interim rule in place since July 2, 2009.
Fannie Mae and Freddie Mac pilot programs, and any modifications of duration or volume made to them, are considered new activities subject to this rule.
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Among the items the FHFA defines as not covered by this new rule include any change to their automated underwriting systems or the terms and conditions or underwriting criteria relating to residential mortgages that are purchased or guaranteed by a GSE. The rule also does not cover changes to an approved new product.
When it comes to excluded activities that are substantially similar to modifications on automated underwriting and the like, Fannie Mae and Freddie Mac will be required to notify the FHFA 15 calendar days prior to their start with an explanation of why they qualify for the exemption.
Among the list of items the GSEs will be required to get prior approval for are new activities that serve underserved markets and are designed to meet their enterprise housing goals of furthering fair housing and fair lending.
They will need to make a notice of new activity to FHFA, which has 15 days to determine it is a new product. If the regulator finds it is not a new product, Fannie Mae and Freddie Mac may start the activity, but the FHFA has the right to place limits on it.
"If FHFA determines that a new activity is a new product, the final rule requires FHFA to publish a public notice soliciting comments on the new product for a 30-day period," a fact sheet stated. "After the comment period has ended, FHFA has 30 calendar days to approve or not approve the new product." If it is approved, the agency again can put limits in place.
Nothing in the final rule prevents the FHFA from reviewing activities for safety and soundness at any time.
