FHFA finalizes capital framework update

Federal Housing Finance Agency moves forward with some work Proposed adjustments “Minor changes” were made to rules related to the financial soundness of Fannie Mae and Freddie Mac.

Certain changes to guarantees for consolidated mortgage-backed securities, apartment loan exposures in government-subsidized buildings and interest-only securities are part of the finalized corporate regulatory capital framework The agency promised to deliver this year.

But not all proposed updates to the framework have made progress.Notably, it withdrew a related update Use credit scores and report to FHFA-regulated businesses.

“FHFA will not currently adopt the proposed changes to the risk-representative credit score selection process for single-family mortgages when at least one borrower submits multiple credit scores,” the agency said.

The omission comes as mixed feedback about the mortgage companies’ programs prompted mortgage companies to opt to use two credit reports instead of three when submitting loans to Fannie Mae and Freddie Mac.

Under the proposal, the industry would move from using the median of the three scores in as many reports or the lower of the two scores to using the average of the two.

“FHFA proposes this change to prevent representative credit scores from declining under the current approach once a business is required to have at least two credit reports instead of three,” the agency explained.

While proponents of this aspect of the proposal have studied and determined that it would not result in substantive changes for borrowers, Others asked questions About whether it might have some unintended negative consequences.

“Given the delayed implementation date of the dual merger requirements and the continued public engagement related to credit scores, FHFA has decided not to adopt the proposed changes to the proxy credit score calculation at this time,” the agency said.

“FHFA may finalize this aspect of the proposed rule in the future,” it added.

The agency did move forward with part of its proposal to update the scoring assumption to 680 for the risk of single-family mortgages without traditional debt payment history.

Industry experts contacted by Deadline were still reviewing the nuances of the final rule.

But one person expressed hope that advancing the overall capital framework would help companies move to a stage where profits do not have to be funneled to the Treasury as they have done since administration

“As one of the leading advocates for ending profit grabbing, CHLA encourages FHFA to complete this rulemaking,” Scott Olson, executive director of Community Home Lenders of America, said in an emailed statement.

“However, it is important to remember that the primary purpose of accumulating capital is to enable Fannie Mae and Freddie Mac to actively fulfill their role of providing mortgage credit to homeowners,” he added.

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