The American Bankers Association on Monday offered feedback on the Federal Housing Finance Agency’s recent request for comment on Fannie Mae’s and Freddie Mac’s single-family pricing framework, with the association recommending regular agency reviews and transparency surrounding the guarantee fees that are a key revenue source for both government-sponsored enterprises.
FHFA published the request in May, seeking input on the goals and policy priorities that the agency should pursue along with feedback on the process for setting the GSEs’ single-family upfront guarantee fees. In its comments, ABA cautioned that the guarantee fees must not be subject to manipulation that misaligns pricing and risk to achieve other ends beyond guaranteeing timely payment of principal and interest on mortgage-backed securities that the GSEs issue. “Therefore, we urge adherence to statutory directives intended to ensure that the GSEs operate in safe and sound manner with adequate capital and risk controls,” ABA said.
ABA recommended requiring a review of guarantee fees every three years, ample transparency regarding guarantee fee pricing and performance outcomes associated with the pricing framework, and instituting certain improvements to implementation procedures when pricing changes occur. The association also recommended that effective dates be based on a loan’s application date, not the purchase or delivery date. “This compliance trigger is much clearer and allows for precise identification of loans covered by the new policy,” ABA said.