FHFA head addresses housing market challenges; lawmakers pan equitable housing plans

Testifying before the House Financial Services Committee today, Federal Housing Finance Agency Director Sandra Thompson acknowledged the challenges currently facing the mortgage market as a result of inflation and rising interest rates. Among other things, she noted that home purchase applications dropped 24% year over year in June, while pending home sales were down 13.5%. She added, however, that despite the challenges, mortgage borrowers today are better positioned than they were prior to the financial crisis in the early 2000s.

With regard to Fannie Mae and Freddie Mac, Thompson noted that recent changes to the Senior Preferred Stock Purchase Agreements between FHFA and the Treasury Department, together with “robust comprehensive income” have “significantly boosted net worth for both enterprises, although there is a long way to go to meet regulatory capital requirements.”

In related news, a group of Senate Republicans wrote to FHFA urging the agency to rethink the “equitable housing finance plans” recently developed by Fannie Mae and Freddie Mac, which are multiyear plans detailing how they will identify homeownership barriers faced by Black and Latino consumers and how they will address racial and ethnic gaps in homeownership.

The lawmakers noted that the plans raise legal concerns, unnecessarily politicize the GSEs and push the limits of the GSEs’ charters, among other things. They also cautioned that the plans “risk setting up another generation of minority borrowers for failure” by relaxing underwriting standards. “After the last few years of very significant house price appreciation, plans that push minority and low-income families into high-leveraged home purchases are concerning and seem to blatantly ignore the lessons of the last housing crisis,” they wrote. “As housing markets are cyclical, it is a question of when, not if, the next downturn begins.”