FHFA slows credit score transition

The Federal Housing Finance Agency (FHFA) announced that it expects to delay its initial timeline for implementing changes to credit requirements used by Fannie Mae and Freddie Mac (the Enterprises) and will provide additional opportunities for public feedback on the transition. The newly planned engagements will include stakeholder forums and listening sessions to identify opportunities and challenges for successfully implementing the new modeling requirements. The planned transition would modernize credit score models and credit reporting requirements in two ways: first, through the adoption of credit score models FICO 10T and VantageScore 4.0; second, through the transition from a tri-merge requirement that necessitates credit reports from all three nationwide consumer reporting agencies to a bi-merge requirement which only requires two. Many housing groups voiced concerns over the initial timeline of changes due to the operational complexities of the transition and the speed at which FHFA intended to implement them.

NHC and other trade groups sent FHFA a letter in June asking them to revisit the implementation timeline of the transition to permit more robust stakeholder feedback. “Overall, we suggest that any timeline of activities be developed subject to stakeholder engagement and be adaptable, ‘soft’ timelines to accommodate future input. FHFA cannot fully anticipate the conclusions and observations that will arise from the stakeholder analysis of the historical data and should not rush to meet a firm deadline at the risk of creating widespread operational challenges,” the letter read. The industry praised FHFA’s new, slower timeline, given the magnitude of the anticipated changes.

“USMI looks forward to participating in the forthcoming forums and listening sessions to collaborate with policymakers and stakeholders to address issues, challenges, and opportunities associated with the implementation of new credit score requirements,” said Seth Appleton, President of U.S. Mortgage Insurers. “As part of the expanded public engagement process, USMI encourages FHFA to direct the GSEs to release loan-level data for Classic FICO, FICO 10T, and VantageScore 4.0 to allow for comprehensive analysis and work toward a smooth transition and achievable timeline that minimizes costs and complexity.”

“This engagement process represents the next logical step in our efforts to ensure robust public input as we work towards implementing the new credit score requirements at the Enterprises,” said FHFA Director Sandra Thompson. “We want to hear from market participants and impacted stakeholders to ensure a smooth transition that minimizes costs and complexity.”

House Financial Services Committee hearing on Basel III

The House Financial Services Committee held a hearing on proposed Basel III standards titled “Implementing Basel III: What’s the Fed’s Endgame?” The hearing discussed the recent interagency notice of proposed rulemaking from the Board of Governors of the Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency that would implement Basel III.

Bank stress tests, Dodd-Frank, capitalization, and banking system resilience were themes throughout the hearing. Much of the debate centered around capital’s role in recent bank failures and whether proposed capital standards would have prevented the failures. Some discussion focused on how the Basel III proposal would impact the progress made through special purpose credit programs, with concerns over the changes making homeownership less affordable for low- and moderate-income families, particularly people of color. NHC joined a coalition of housing industry and advocacy organizations in urging regulators not to raise capital standards for bank-originated mortgages with down payments below 20% due to setbacks it would cause for increasing Black homeownership.

“The cost to consumers is that there will be fewer sources of mortgage financing and that mortgage servicing rights, which this proposal caps at 10% instead of 25%, will go down in value and that affects the price of every loan written regardless of whether it’s made by a bank covered by this proposal or anyone,” said Robert Broeksmit, President and CEO of Mortgage Bankers Association, during the hearing.

Other witnesses included Greg Baer, President and CEO of the Bank Policy Institute; Andrew Olmem, Partner at Mayer Brown; and Alexa Philo, Senior Policy Analyst at Americans for Financial Reform. 

Fed swears in new Board of Governors members, including first Latina

The Board of Governors of the Federal Reserve System Chair Jerome Powell swore in its new members, including Dr. Adriana Kugler. Dr. Kugler is the Fed’s first Latina governor in the 109-year history of the Board.

“To hear her tell her story is to listen to the American dream come to life,” said Senator and senior member of the Senate Banking Committee Bob Menendez (D-N.J.). “At its core, it’s about changing the face of leadership so that our institutions, these bodies that we entrust with the future wealth and prosperity of our country, can fully reflect the nation that they serve.”

Dr. Philip Jefferson was sworn in as Vice Chair, previously held by Lael Brainard. Dr. Lisa Cook was also sworn in for her second term with the Board.

Ginnie Mae launches new Social Bond Enhancements

Ginnie Mae announced that it now offers a “Social Bond” label for Single-Family Forward Mortgage-Backed Securities (MBS) prospectuses and released the Social Impact and Sustainability Framework to support its mission-oriented work. The prospectus revisions will help increase investor awareness of the value of Ginnie Mae’s securities and highlight aspects of the programs that have a significant social impact by promoting access to financing for historically underserved communities.

“Ginnie Mae has been driving social impact through the capital markets for the past 55 years,” said Ginnie Mae President Alanna McCargo. “Adding a social label alongside the impact framework and data disclosures for our program makes clear the social benefit that is inherent in our mortgage-backed securities and allows investors the choice to identify what they deem to be a meaningful social impact investment.”

HUD and USDA allocate $1.18 billion in energy efficiency and climate resilience funds

HUD and the U.S. Department of Agriculture (USDA) announced new climate funding initiatives as part of the Biden administration’s Justice 40 goals and Investing in America agenda.

HUD announced an $18 million award under the Green and Resilient Retrofit Program (GRRP) for energy efficiency and climate resilience in HUD-Assisted Multifamily Housing programs. Funding will upgrade 28 multifamily properties with more than 3,400 HUD-Assisted Multifamily rental homes for low-income families, seniors, and persons with disabilities. Climate resilient technologies to support energy cost and greenhouse gas emission reductions include wind- and fire-resistant roofing, geothermal energy systems, heat pumps, insulation, air sealing, and more. “GRRP is a significant investment in communities that typically do not receive this type of assistance yet are often the most adversely affected by climate change,” said HUD Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon.

USDA announced $1 billion in competitive grants to plant and maintain trees, combat extreme heat and climate change, and improve community access to nature. USDA is awarding the funds to 385 grantees through its Urban and Community Forestry Program to support equitable access to trees and nature to cool streets, improve air quality, promote food security, and support public health.

“These investments arrive as cities across the country experience record-breaking heatwaves that have grave impacts on public health, energy consumption, and overall well-being,” said USDA Secretary Tom Vilsack. “We are supporting communities in becoming more resilient to climate change and combatting extreme heat with the cooling effects of increased urban tree canopy, while also supporting employment opportunities and professional training that will strengthen local economies.”

HUD announces $19 million in funding awards

HUD announced several awards to address various housing needs. Fifty-six public housing agencies received $10 million to enhance safety and security at public housing developments. Public housing authorities (PHAs) can use these grants to replace and repair capital equipment or systems, including security systems, fencing, emergency alarm systems, locks, doors, and carbon monoxide detectors. As part of the Foster Youth to Independence Initiative, HUD allocated $800,000 in funding for 18 PHAs. The funds provide housing choice vouchers for youth exiting foster care. In collaboration with public child welfare agencies, PHAs in 12 states will receive the funds for 84 vouchers. Finally, HUD awarded 29 Tribal HUD-Veterans Affairs Supportive Housing awards of $8.6 million to provide rental assistance to Native American veterans experiencing, or at risk of experiencing, homelessness.