Fiscal Oversight
Economic Planning & Strategy
Federal Housing Finance Enterprises and Agencies
Fannie Mae
Freddie Mac
HUD, Government National Mortgage Association
HUD, Federal Housing Administration
VA, Veteran’s Home Lending
Ensure that mortgage credit is available every day in every market through fair and equitable housing policies and programs.
FEDERAL INFLUENCERS you need to UNDERSTAND
SitusAMC’s interactive map provides a guide to the key participants and stakeholders in the federal landscape.
Explore our interactive map to learn about important influencers — who they are, what they do, and how they impact each other and housing finance policy.
FEDERAL
THE
ECOSYSTEM
USDA, Rural Home Lending
Treasury, Office of the Comptroller of the Currency
Treasury, Financial Stability Oversight Council
Federal Reserve Board
Federal Deposit Insurance Corporation
Identifying and mitigating real and perceived risks to the financial system of the United States through oversight and policy making.
Government Accountability Office
Office of Management and Budget
National Economic Council
Council of Economic Advisers
Advising the President and members of Congress on matters related to fiscal policies and to ensure the alignment of those policies with those of federal agencies
Congressional Budget Office
Federal Housing Finance Agency
Consumer Financial Protection Bureau
Independent federal agencies tasked with ensuring consumers are treated fairly across credit markets, and to achieve affordable and sustainable homeownership and rental opportunities.
HOUSING
Enterprise and Agency Oversight
Federal Housing Finance Agencies
Enterprise and Oversight
SitusAMC’s interactive map provides a guide to the key participants and stakeholders in the federal landscape
List of Influencers
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Federal Housing FInance Agencies
Sources 1. whitehouse.gov - CEA 2. whitehouse.gov - CEA 3.whitehouse.gov - CEA 4. econofact.org - CEA & Expert Economic Advice
The CEA works with the White House, NEC, and NSC to coordinate and guide an evidence-based economic policy-making process with input and technical support from the agencies and offices of the Executive Branch.
What players are affected by this organization, or is this organization affected by? How are they affected?
Associated Players
Offering the President objective economic advice on the formulation of both domestic and international economic policy.
What are the areas of concern, either existentially for the organization, or for the industry/system?
Concerns
What aspects of Housing finance does the organization focus on, what activities does it engage in?
Focus
The Council focuses on all areas of economic policy, including housing and housing finance. The Council is the analytic complement to the National Economic Council (NEC). The CEA’s activities include:
- Assisting and advising the President in the preparation of the Economic Report. - Gathers timely and authoritative information concerning economic developments and economic trends, both current and prospective, analyzes and interprets such information in the light of the policy declared in section 2 for the purpose of determining whether such developments and trends are interfering, or are likely to interfere, with the achievement of such policy, and to compile and submit to the President studies relating to such developments and trends. - Appraises the various programs and activities of the Federal Government in the light of the policy declared in section 2 for the purpose of determining the extent to which such programs and activities are contributing, and the extent to which they are not contributing, to the achievement of such policy, and to make recommendations to the President with respect thereto. - Develops and recommends to the President national economic policies to foster and promote free competitive enterprise, to avoid economic fluctuations or to diminish the effects thereof, and to maintain employment, production, and purchasing power. - Makes and furnishes such studies, reports thereon, and provides recommendations with respect to matters of Federal economic policy and legislation as the President may request.
Purpose/Rationale
Why was the organization formed, what is it intended to do?
The Council of Economic Advisers, an agency within the Executive Office of the President, is charged with offering the President objective economic advice on the formulation of both domestic and international economic policy. The Council bases its recommendations and analysis on economic research and empirical evidence, using the best data available to support the President in setting the nation’s economic policy. ¹
Industry Segment
Leadership
The Council is currently comprised of a Chairman and two Members.
Council of Economic AdvisErs
VA, Veteran's Home Lending
USDA, rural Home Lending
Policy Making
LIST of INFLUENCERS
Federal Housing FInance Enterprises and Agencies
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Sources 1. obamawhitehouse.archives.gov - NEC 2. americanprogress.org - White House Wartell 3. americanprogress.org - White House Wartell 4. americanprogress.org - White House Wartell
The NEC must serve as an honest broker among agencies and viewpoints. Working groups should be established in the key areas of administration policy focus – for example, the housing market or retirement savings. Working groups should also convene to develop a new presidential initiative or a response to a new situation or major legislation. An NEC decision memo should lay out the background, detail a set of options, and argue the advantages and disadvantages of each in an unbiased way. A recommendation section allows each advisor or agency to specify their own recommendation regarding the options described and reasoning in brief.
The National Economic Council (NEC) was established in 1993 to advise the President on U.S. and global economic policy. It resides within the Office of Policy Development and is part of the Executive Office of the President. By Executive Order, the NEC has four principal functions: to coordinate policy-making for domestic and international economic issues, to coordinate economic policy advice for the President, to ensure that policy decisions and programs are consistent with the President's economic goals, and to monitor implementation of the President's economic policy agenda.
Chaired by the President, Directed by the Assistant to the President for economic policy.
Although the Federal Reserve is intended to be independent and nonpolitical, the NEC will consult with the Fed Chairman, Fed Governors, and advisory councils to ensure balance between private interests of banks and the Fed’s responsibility to supervise and regulate banking institutions and manage monetary policy. Collaborates with the OMB to ensure that federal agencies' programs, policies, and procedures are consistent with the White House’s agenda. Must work with the White House Counsel, which oversees the president’s policies, to forge common advocacy strategies and messages.
The economic issues that are most effectively handled through the NEC process generally share certain characteristics. Typically, more than one agency has a stake in the decision, requiring interagency input and coordination. The NEC, however, also might coordinate presidential decision making on an issue affecting only a single agency, especially if the issue received significant public or congressional attention and the press or members of Congress would look to the President directly. The NEC also helps to coordinate the development of new initiatives that represent the President’s priorities. Although the NEC is not an implementation agency, it should periodically check in on implementation of key initiatives to ensure the President’s objectives are being met.
Sources 1. whitehouse.gov - OMB
The OMB is charged with vetting the majority of policy decisions by government agencies and testing them on the basis of their financial and social merits.
To ensure government agencies are setting goals and policies that are consistent with the President’s social and economic agenda.
The OMB is a cabinet-level agency operating under the authority of the Executive Office of the President. The OMB serves the President in overseeing the implementation of his or her vision across the Executive Branch. OMB’s mission is to assist the President in meeting policy, budget, management, and regulatory objectives and to fulfill the agency’s statutory responsibilities.
All six positions within the OMB are nominated by the President and confirmed by the Senate.
OFFICE OF MANAGEMENT AND BUDGET
The work of GAO is done at the request of congressional committees or subcommittees or is mandated by public laws or committee reports. Additionally, it undertakes research independently under the authority of the Comptroller General.
The GAO’s audits of agency operations affect all the government housing finance agencies. Its investigations and audits of government housing finance programs:
- Support congressional oversight; - Determine whether federal funds are being spent efficiently and effectively; - Investigate allegations of illegal and improper activities; - Report on how well government programs and policies are meeting their objectives; - Perform policy analyses and outline options for congressional consideration; - Issue legal decisions and opinions; - Advise Congress and the heads of executive agencies about ways to make government more efficient and effective
The GAO was formed after World War I to provide Congress with better information and greater control over government spending. Over time its role expanded beyond examining payments and purchases to include more comprehensive financial audits that examine the economy and efficiency of government operations. In the 1960s the GAO began conducting performance audits which examine whether government programs are meeting their objectives. The GAO is the U.S. government’s audit institution and is part of the Legislative branch. It provides Congress with timely information that is objective, fact-based, nonpartisan, non-ideological, and balanced. The GAO has the authority to investigate all matters related to the use of public funds, report its findings, and make recommendations to increase economy and efficiency in government spending.
Comptroller General of the U.S.
Pandemics
Other Relevant Information
Sources 1. gao.gov - What GAO Is 2. gao.gov - What GAO Does 3. gao.gov - Mission 4. gao.gov - What GAO Does 5. gao.gov - Key Issues Overview
GAO provides Congress, the heads of executive agencies, and the public with timely, fact-based, nonpartisan information that can be used to improve government and save taxpayers billions of dollars. The results of GAO audits can have both budgetary and legislative implications for Executive Agencies, such as FHA, VA, etc. Additionally, a GAO audit report can result in programmatic changes that impact all the stakeholders in a given program. That may mean changes to operational processes, changes to policy requirements, or rarely, elimination of a program. Stakeholders need to be aware that the GAO reports are public, and to the extent they uncover illegal or improper activities, they could be the catalyst for an Office of Inspector General investigation of an Agency, or another stakeholder, such as an FHA-approved Mortgagee.
Preparedness for and response to crises like COVID-19
2020 Census
Challenges to ensuring an accurate count
America’s Fiscal Future
A big-picture look at the nation's fiscal condition
High Risk List
Programs and agencies needing continued attention
Technology & Science
Policy, research, development, and applications
Duplication & Cost Savings
Changes that could improve efficiency or decrease costs
The GAO was formed after World War I to provide Congress with better information and greater control over government spending. Over time its role expanded beyond examining payments and purchases to include more comprehensive financial audits that examine t he economy and efficiency of government operations. In the 1960s the GAO began conducting performance audits which examine whether government programs are meeting their objectives. The GAO is the U.S. government’s audit institution and is part of the Legislative branch. It provides Congress with timely information that is objective, fact-based, nonpartisan, non-ideological, and balanced. The GAO has the authority to investigate all matters related to the use of public funds, report its findings, and make recommendations to increase economy and efficiency in government spending.
The biggest concern is maintaining its nonpartisan reputation, to ensure that the objective and impartial analysis is widely accepted.
CBO is strictly nonpartisan and produces independent analysis of budgetary and economic issues to support the Congressional budget process. Each year, the agency releases reports and cost estimates for proposed legislation, without issuing any policy recommendations.
- Baseline Budget and Economic Projections - Long-Term Budget Projections - Cost Estimates - Analytic Reports - Analysis of the President’s Budget - Budget Options - Analyses of Federal Mandates - Monthly Budget Review - Scorekeeping for Legislation - Compilations of Unauthorized Appropriations and Expiring Authorizations - Sequestration Reports - Working Papers - Data & Technical Information
CBO was created as a part of the legislative branch and to bolster Congress’ budgetary understanding and ability to act, and to lessen Congress’ dependence on the OMB.
Director — Appointed jointly by the Speaker of the House and the president pro tempore of the Senate, after considering recommendations from the two Budget Committees.
CONGRESSIONAL BUDGET OFFICE
Sources 1. wikipedia.org - CBO 2. cbo.gov - 2016 Intro To CBO 3. cbo.gov - About Overview 4. cbo.gov - 2016 Intro To CBO
Senate Budget Committee, House Budget Committee, Congress broadly – Primarily, the CBO “scores” the federal budget, projecting costs for 10 years. It also scores other legislation for its impact on the budget deficit and debt. Members of Congress use this information to inform proposed legislation.
CBO’s Products:
The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to maintain stability and public confidence in the nation's financial system by:
FDIC acquires the assets of failed financial institutions, including mortgage loans and mortgage servicing portfolios resolution. FDIC also oversees Community Reinvestment Act strategies.
The Federal Deposit Insurance Corporation (FDIC) is an independent federal agency insuring deposits in U.S. banks and thrifts in the event of bank failures. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices. The FDIC directly examines and supervises about 4,000 banks and savings banks for operational safety and soundness, more than half of the institutions in the banking system. The FDIC is the primary federal regulator of banks that are chartered by the states that do not join the Federal Reserve System. In addition, the FDIC is the back-up supervisor for the remaining insured banks and thrift institutions. The FDIC is managed by a five-person Board of Directors, all of whom are appointed by the President and confirmed by the Senate, with no more than three being from the same political party.
Chair — appointed by the President.
Sources 1. investopedia.com - Terms: FDIC 2. fdic.gov- Buying Owned 3. fdic.gov - Mortgage Lending Index 4. fdic.gov - Mission 5. fdic.gov - Index
During the housing crisis, several banks failed, and the FDIC placed them in receivership. If they held federally backed mortgage loans or servicing, they coordinated with the GSEs, Ginnie Mae, FHA, VA etc. to manage the disposition of those assets. The FDIC also supervises insured banks for compliance with the Community Reinvestment Act (CRA). The Chairperson of the FDIC is a voting member of FSOC, and has influence over FSOC policy and requirements on systemically important institutions, including non-bank financial companies.
FDIC Major Programs
- Insuring deposits - Examining and supervising financial institutions for safety and soundness and consumer protection - Making large and complex financial institutions resolvable and - Managing receiverships.
Insurance
Insured depositors are protected from loss without recourse to taxpayer funding
FDIC-insured institutions are safe and sound; consumers' rights are protected FDIC-supervised institutions invest in their communities; and large and complex financial institutions are resolvable in an orderly manner under bankruptcy
Supervision
Resolutions are orderly and receiverships are managed effectively
Receivership Management
The FRB guides monetary policy action, to analyze domestic and international economic and financial conditions, and to lead committees that study current issues, such as consumer banking laws and electronic commerce. They also exercise broad supervisory control over the financial services industry, administer certain consumer protection regulations, and oversee the nation's payments system. The Board oversees the activities of Reserve Banks, approving the appointments of their presidents and some members of their boards of directors. The Board sets reserve requirements for depository institutions and approves changes in discount rates recommended by Reserve Banks. The Board's most important responsibility is participating in the Federal Open Market Committee (FOMC), which conducts the nation's monetary policy; the seven governors comprise the voting majority of the FOMC with the other five votes coming from Reserve Bank presidents.
The Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.
Governing Body — Board of Governors Appointed by the President.
Sources 1. federalreserve.gov - About the Fed 2. federalreserve.gov - About the Fed 3. federalreserveeducation.org - Structure & Functions 4. federalreserve.gov - About the Fed
Lenders and borrowers are affected by changes in interest rates, as the FOMC takes action to adjust the money supply to stimulate the economy, or stave off inflation, both of which have an indirect impact on mortgage rates. Board members are called to testify before Congress, and they maintain regular contact with other government organizations as well. The chairman reports twice a year to Congress on the Fed's monetary policy objectives, testifies on numerous other issues, and meets periodically with the Secretary of the Treasury. The Federal Reserve supervises and regulates financial institutions for safety and soundness of the entity themselves, as well as their impact on the system as a whole. Borrowers are impacted by the Federal Reserve’s efforts to increase understanding of the impacts of financial services policies and practices on consumers and communities. The whole industry from borrowers to securities investors benefit from the Federal Reserve’s efforts fostering payment and settlement system safety and efficiency.
The Federal Reserve
- Conducts the nation’s monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy - Promotes the stability of the financial system and seeks to minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad - Promotes the safety and soundness of individual financial institutions and monitors their impact on the financial system as a whole - Fosters payment and settlement system safety and efficiency through services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments; and - Promotes consumer protection and community development through consumer-focused supervision and examination, research and analysis of emerging consumer issues and trends, community economic development activities, and the administration of consumer laws and regulations.
Industry concerns generally relate to the fear of over regulation/supervision, which can render certain activities, such as portfolio lending, unattractive and constrain credit. Conversely, the FSOC and Congress (to which it issues regular reports) share the concern that the FSOC isn’t doing enough.
The FSOC has a clear mandate that creates collective accountability for identifying risks and responding to emerging threats to financial stability. It also has authorities to constrain excessive risk in the financial system, including the ability to designate a nonbank financial firm for tough new supervision.
Treasury – Financial Stability Oversight Council
Sources 2. treasury.gov - About FSOC 2. treasury.gov - About FSOC 3. treasury.gov - About FSOC
Any of the very large banks, and/or the very large non-bank lenders are at risk of being designated as systemically important, which comes with heightened supervision and regulation.
- Facilitate Regulatory Coordination - Facilitate Information Sharing and Collection - Designate Nonbank Financial Companies for Consolidated Supervision - Designate Systemic Financial Market Utilities and Systemic Payment, Clearing or Settlement Activities - Recommend stricter standards - Break Up Firms that Pose a “Grave Threat” to Financial Stability
Chair — The Secretary of the Treasury. Voting Members — FRB, OCC, CFPB, SEC, FDIC, CFTC, FHFA, NCUA, and an independent member with insurance expertise. Non-Voting Members — Director of the Office of Financial Research, Director of the Federal Insurance Office, a state insurance commissioner, a state banking supervisor, state securities commissioner.
Prior to the 2008 financial crisis, the U.S. financial regulatory framework was siloed which allowed supervisory gaps to grow, and inconsistencies to emerge—in turn, allowing arbitrage and weakened standards. These problems were addressed by the creation of the FSOC which can:
Its activities have the ability to impact Housing Finance through the additional supervision of large financial institutions, and nonbank financial companies, including Mortgage Bankers.
The OCC, an independent branch of the U.S. Department of the Treasury, charters, regulates, and supervises all national banks and federal savings associations as well as federal branches and agencies of foreign banks.
Treasury – OFFICE OF THE COMPTROLLER OF THE CURRENCY
Sources 1. occ.treas.gov - About 2. occ.treas.gov - What We Do
The OCC is affected by the FDIC; alignment between the two agencies’ requirements facilitates compliance.
- Ensures fair access and equal treatment to bank customers - Helps banks be leaders in safe and sound community development financing and making financial services accessible to underserved communities and consumers - Makes sure banks comply with consumer banking laws
The Comptroller of the Currency is appointed by the President, by and with the advice and consent of the Senate.
Mortgage loans and lending are a component of the OCC’s oversight of federally chartered banks.
Supervise & Examine
Regulate & Enforce
- Is the primary regulator of banks chartered under the National Bank Act and federal savings associations chartered under the Home Owners' Loan Act - Issues rules and regulations that govern the banks it supervises - Takes supervisory actions against banks that do not comply with these statutes or that otherwise engage in risky practices
Charter & License
- Oversees the in-depth application process financial institutions must follow to be chartered as an OCC-supervised bank - Oversees applications from chartered banks to make substantial changes to their activities or structure - Evaluates the applications to make sure banks' corporate structures are established and maintained in accordance with the principles of a safe and sound banking system - Operates a licensing department that works closely with the agency's supervisory and legal divisions to render independent decisions regarding applications
Protect Consumers & Communities
FNMA was created in 1938 to establish a secondary mortgage market for loans insured by the Federal Housing Administration. In 1968, Fannie Mae split into two parts. What remained of Fannie Mae became a publicly traded company, that could buy any mortgage, not just those insured by the government. Fannie Mae retained the public purpose of expanding secondary mortgage markets along with other public policy goals. Until the housing crisis, Fannie Mae MBS were considered "implicitly” backed by the federal government, which enabled a liquid market with affordable rates. In 2008, the federal government placed Fannie Mae, along with its brother enterprise Freddie Mac, into conservatorship, and the federal backing was made explicit to prevent the GSEs from failing and to maintain mortgage liquidity at the height of the crisis. Now that both GSEs are more closely regulated and monitored, their businesses have become very similar, especially with the launch of the Common Securitization Platform (CSP). Fannie Mae remains in conservatorship, where FHFA’s goals are to:
Federal National Mortgage Association - Fannie Mae
Sources 1. thebalance.com - What Is Fannie Mae; FNMA 2. wikipedia.org - Fannie Mae 3. fhfa.gov - Conservatorship 4. fhfa.gov - FHFA 2019 PAR 5. fhfa.gov - 2019 Conservatorships Strategic Plan 6. fhfa.gov - 2019 Conservatorships Strategic Plan
The Treasury Department owns Senior Preferred Shares of the GSEs and, together with the Director of the FHFA must agree to any changes to the Preferred Stock Purchase Agreement. (Conservatorship) The FHFA serves as both the GSEs' conservator and its regulator, so it oversees not only the financial condition and activities, but provides the guard rails, so to speak, within which the GSEs may establish or change program requirements. The Securities Industry and Financial Markets Association (SIFMA) which sets the requirements for the TBA (To Be Announced) securities. Most MBS are issued as TBA securities, as that is the best market pricing, which translates into better interest rates for borrowers. Congress’ approval may be required to fully release the GSEs from conservatorship, and in the past Congress has required additional g-fee collection for various purposes.
Corporate Structure, led by C-suite executives, and Board of Directors. Fannie Mae is currently under the conservatorship of FHFA.
Fannie Mae establishes credit underwriting standards and buys single and multifamily mortgages that meet its standards from mortgage lenders, which enables those lenders to make additional loans; and transfers the risk of default from the lenders to Fannie Mae. Once purchased, the loans are then securitized, and the resulting MBS traded in the marketplace. Lenders subservice the loans on Fannie Mae’s behalf. Fannie Mae pays the MBS investors the principal and interest payments, less the servicing and g-fee, monthly. Fannie Mae is also required to ensure that its guidelines provide access across different borrower segments to provide homeownership opportunities to creditworthy borrowers.
- Foster competitive, liquid, efficient, and resilient (CLEAR) national housing finance markets that support sustainable homeownership, - Ensure the GSEs operate in a safe and sound manner, and - Prepare for the GSEs eventual exit from conservatorship.
While in conservatorship, the GSEs are largely subject to the will and the priorities of the FHFA Director. The FHFA Director will need concurrence with the Treasury Secretary as policy decisions relate to their investments in the GSEs. As conservator, FHFA has the powers of the management, boards, and shareholders of Fannie Mae and Freddie Mac. While the primary obligation of FHFA as Conservator is to maintain the GSEs' business operations and to restore them to safe and sound financial condition, the GSEs are often viewed as instruments of public policy to achieve social and economic objectives. A primary concern about the status of the GSEs in conservatorship is the FHFA having to balance a political party’s mission -- e.g. expanding access to homeownership, shrinking or expanding the GSEs' footprint in mortgage finance, etc. -- with the legal requirements of conservatorship related to managing risks and restoring the safety and soundness of the enterprises.
Freddie Mac was created in 1970 to expand the secondary market for mortgages and to promote competition for Fannie Mae. Initially it was governed by the Federal Home Loan Bank (FHLB) Board, but in 1989 it was separated from the FHLB System, and regulations were revised and standardized for both GSEs. Until the housing crisis, Freddie Mac MBS were considered "implicitly” backed by the federal government, which enabled a liquid market with affordable rates. In 2008, the federal government placed Freddie Mac, along with its sister enterprise Fannie Mae, into conservatorship, and the federal backing was made explicit to prevent the GSEs from failing and to maintain mortgage liquidity at the height of the crisis. Now that both GSEs are more closely regulated and monitored, their businesses have become very similar, especially with the launch of the Common Securitization Platform (CSP) Freddie Mac remains in conservatorship, where FHFA’s goals are to;
Federal Home Loan Mortgage Corporation — Freddie Mac
Sources 1. Freddiemac.com 2. Wikipedia.org - Freddie Mac 3. fhfa.gov - Conservatorship 4. fhfa.gov - FHFA 2019 PAR 5. fhfa.gov - 2019 Conservatorships Strategic Plan 6. fhfa.gov - 2019 ConservatorshipsS trategic Plan
The Treasury Department owns Senior Preferred Shares of the GSEs and, together with the Director of the FHFA must agree to any changes to the Preferred Stock Purchase Agreement. (conservatorship). The FHFA serves as both the GSEs' conservator and its regulator, so it oversees not only the financial condition and activities, but provides the guard rails, so to speak, within which the GSEs may establish or change program requirements. SIFMA who sets the requirements for the TBA (To Be Announced) securities. Most MBS are issued as TBA securities, as that is the best market pricing, which translates into better interest rates for borrowers. Congress’ approval may be required to fully release the GSEs from conservatorship, and in the past Congress has required additional g-fee collection for various purposes.
Corporate Structure, led by C-suite executives, and Board of Directors. Freddie Mac is currently under the conservatorship of FHFA.
Freddie Mac establishes credit underwriting standards and buys single and multifamily mortgages that meet its standards from mortgage lenders, which enables those lenders to make additional loans; and transfers the risk of default from the lenders to Freddie Mac. Once purchased, the loans are then securitized, and the resulting MBS traded in the marketplace. Lenders subservice the loans on Freddie Mac’s behalf. Freddie Mac pays the MBS investors the principal and interest payments, less the servicing and g-fee, monthly. Freddie Mac is also required to ensure that its guidelines provide access across different borrower segments to provide homeownership opportunities to creditworthy borrowers.
- Foster competitive, liquid, efficient, and resilient (CLEAR) national housing finance markets that support sustainable homeownership - Ensure the GSEs operate in a safe and sound manner, and - Prepare for the GSEs' eventual exit from conservatorship.
While in conservatorship, the GSEs are largely subject to the will and the priorities of the FHFA Director. The FHFA Director will need concurrence with the Treasury Secretary as policy decisions relate to their investments in the GSEs. As conservator, FHFA has the powers of the management, boards, and shareholders of Freddie Mac and Fannie Mae. While the primary obligation of FHFA as Conservator is to maintain the GSEs' business operations and to restore them to safe and sound financial condition, the GSEs are often viewed as instruments of public policy to achieve social and economic objectives. A primary concern about the status of the GSEs in conservatorship is the FHFA having to balance a political party’s mission -- e.g. expanding access to homeownership, shrinking or expanding the GSEs' footprint in mortgage finance, etc. -- with the legal requirements of conservatorship related to managing risks and restoring the safety and soundness of the enterprises.
As a wholly owned government corporation within the Department of Housing and Urban Development (HUD), Ginnie Mae’s mission is to expand affordable housing finance in America by linking domestic and global capitalization to the nation's housing finance markets, providing market liquidity to federally sponsored mortgage lending programs.
Government National Mortgage Association (Ginnie Mae)
Sources 1. ginniemae.gov - Our Mission 2. ginniemae.gov - Programs Products 3. federalregister.gov - GNMA 4. investopedia.com - Terms: ginniemae 5. investopedia.com - Terms: ginniemae
FHA, VA, USDA RHS, and PIH mortgages are eligible for Ginnie Mae Securities. As such, close coordination is needed between Ginnie Mae and these agencies to ensure Ginnie Mae securities can accommodate program changes, and still maintain the liquidity and marketability of the securities. Ginnie Mae directly impacts: - Investors, which purchase securities & receive monthly pass-through of principal and interest from borrowers; AAA- rated MBS provide higher yields and meet Basel III Requirements - Lenders/issuers, which originate or acquire government-backed loans, assemble them into pools and issue Ginnie Mae guaranteed MBS - FHA/VA/RD/PIH, which insure or guarantee loans eligible for Ginnie Mae MBS - Ginnie Mae is indirectly affected by the FHFA, CFPB, and the FDIC.
The President appoints the president of Ginnie Mae, who is also considered an Assistant Secretary in HUD.
Ginnie Mae facilitates the issuance of Mortgage-Backed Securities (MBS) through its pooling platform and guarantees the pass-through of principal and interest to securities-holders. Only loans insured or guaranteed by FHA, VA, USDA RHS, or PIH are eligible. Ginnie Mae offers mortgage-backed securitization programs for:
- Foster competitive, liquid, efficient, and resilient (CLEAR) national housing finance markets that support sustainable homeownerships - Ensure the GSEs operate in a safe and sound manner, and - Prepare for the GSEs' eventual exit from conservatorship.
GNMA is the only federal agency tasked with the administration and oversight of an explicit, paid-for, full-faith-and-credit guarantee on Mortgage-Backed Securities. Through this guarantee, Ginnie Mae is providing access to the secondary markets for Issuers. As a result, effectively managing counterparty risk is paramount to the health of the Ginnie Mae Program. Since the Great Recession, an increasing portion (over 60%) of Ginnie Mae’s over $2 trillion book of business is serviced by non-depository lenders, otherwise known as mortgage bankers. These issuers do not have the same access to ready liquidity as the banks do, and are heavily reliant on financing (MSRs, EBOs, warehouse, etc.). Any hint of trouble can lead to adverse events that would make the Issuer unable to meet its obligations to Ginnie Mae. Ginnie Mae must then step in and take over the issuer’s portfolio responsibilities. If enough issuers were to fail in adverse economic conditions, Ginnie Mae could have to request funds to meet its obligation.
- FHA Home Equity Conversion Mortgages (HECM) called HMBS - Single-Family loans - Multifamily loans - Manufactured Housing (Title I) loans
Ginnie Mae MBS pools can be combined into multiclass securities
- Platinum - Real Estate Mortgage Investment Conduits (REMICs) - Stripped Mortgage-Backed Securities
Ginnie Mae's cousins Freddie Mac, Fannie Mae, and Sallie Mae differ from Ginnie Mae because they are "Government-Sponsored Enterprises" (GSEs), which are federally chartered corporations that are privately owned by shareholders. Additionally, they establish the credit and property underwriting requirements for loans to be eligible in their programs, where Ginnie Mae does not. That is the purview of FHA, VA, USDA RHS, and PIH.
Ginnie Mae facilitates the issuance of Mortgage-Backed Securities (MBS) through its pooling platform and guarantees the pass-through of principal and interest to securities-holders. Only loans insured or guaranteed by FHA, VA, USDA RHS, or PIH are eligible. Ginnie Mae offers mortgage-backed securitization programs for: - FHA Home Equity Conversion Mortgages (HECM) called HMBS - Single-Family loans - Multifamily loans - Manufactured Housing (Title I) loans
As a wholly owned government corporation within the Department of Housing and Urban Development (HUD), Ginnie Mae’s mission is to expand affordable housing finance in America by linking domestic and global capitalization to the nation's housing finance markets, providing market liquidity to federally sponsored mortgage lending programs. - Foster competitive, liquid, efficient, and resilient (CLEAR) national housing finance markets that support sustainable homeownerships - Ensure the GSEs operate in a safe and sound manner, and - Prepare for the GSEs' eventual exit from conservatorship.
The Federal Housing Administration, generally known as "FHA," was formed under the National Housing Act of 1934 to improve housing standards and conditions, provide an adequate home financing system through insurance of mortgage loans, and to stabilize the mortgage market during the depression. Until the FHA came along, mortgage loans required large down payments and had terms of about five years. FHA insured loans with 10% down and 25-year terms, paving the way for the 30-year mortgages of today. In 1965, the FHA was rolled into the newly formed Cabinet department of Housing and Urban Development (HUD). FHA continues to set standards for safe and affordable housing throughout the United States and its territories. Through FHA-approved lenders, FHA insures mortgages on single-family homes, multifamily properties, residential care facilities, and hospitals. It is one of the largest insurers of mortgages in the world, insuring more than 46 million mortgages since its inception in 1934.
Federal Housing Administration (FHA)
Private lenders must comply with FHA requirements when making FHA-insured loans. Ginnie Mae sets parameters for loans in its securities, and FHA must ensure its loans are eligible in order to maintain liquidity in the marketplace. FHA’s programs are subject to audit by the HUD Office of the Inspector General (OIG) and GAO. FHA program changes are subject to approval by OMB.
Assistant Secretary for Housing - Federal Housing Commissioner. Deputy Assistant Secretaries (DAS) for
FHA’s Single Family program is focused on sustainable and affordable homeownership, as well as the stability of the mortgage market. Its programs are designed first and foremost to help first-time homebuyers and those with low to moderate incomes become homeowners. FHA only requires a 3.5% down payment and has more flexible credit requirements than the conventional market. FHA also sets standards for property conditions, ensuring that homes are safe and habitable. FHA was born out of the Great Depression, where it helped to stabilize the housing market and increased homeownership. Indeed, it performed this countercyclical role in the 2008 housing crisis, and went from insuring approximately 5% of mortgages to over 25%. FHA also insures multifamily properties, residential care facilities and hospitals. Its multifamily programs incentivize investments in affordable housing and set minimum property condition standards. Its programs support over 300,000 rental units, including those for seniors and people with disabilities. FHA's healthcare insurance programs facilitate access to hospital medical care and assisted living in hundreds of communities across the country. Part of HUD's Office of Housing, FHA operates as a self-funded entity, obtaining capital to operate its programs from the mortgage insurance premiums it receives from lenders that participate in its programs. FHA is the largest mortgage insurer in the world with an active insurance portfolio of over $1.3 trillion.
FHA's systems are outdated and inadequate. FHA has been asking for funding for several years and only recently received some appropriations to modernize technology. It is unclear whether or not FHA will receive enough funding in the coming years to complete the overhaul. FHA must also ensure that the Mutual Mortgage Insurance Fund (MMIF) stays above the required thresholds.
- Affordable Housing Preservation - Finance and Budget - Multifamily Housing - Single Family Housing - Risk Management and Regulatory Affairs - Housing Operations
- Key Departments / Committees - Mortgage Review Board (MRB)
MRB is empowered to take administrative action against FHA- approved lenders that are not in compliance with FHA lending requirements. The Board reviews cases that are referred. The cases before the Board typically include those involving lenders who knowingly and materially violate HUD/FHA program statutes, regulations and handbook requirements. These lenders are subject to administrative sanctions by the MRB. For serious violations, the Board can withdraw a lender's FHA approval so the lender cannot participate in FHA programs. In less serious cases, the Board enters into settlement agreements with lenders to bring them into compliance. The Board can also impose civil money penalties, probation, and suspension, and issue letters of reprimand.
VA helps service members, veterans, and eligible surviving spouses become homeowners. They provide a home loan guaranty benefit and other housing-related programs to help veterans buy, build, repair, retain, or adapt a home for their own personal occupancy. VA Home Loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan, enabling the lender to provide veterans with more favorable terms.
Veterans Benefit Administration — Loan Guaranty Service
Sources 1. benefits.va.gov - Home Loans 2. benefits.va.gov - Index 3.hsh.com - Issues with VA Loans
The VA is substantially impacted by its Congressional oversight committees, as well as veterans advocacy groups. It must also work constructively with Ginnie Mae, to ensure liquidity and competitive rates for VA-backed loans. The VA is also impacted by veteran’s advocacy groups, and the service members affairs office at CFPB.
The Loan Guaranty Service is led by a Director, who is usually a member of the career civil service. The VA is a cabinet department led by a presidentially appointed Secretary. The Loan Guaranty reports through the Undersecretary for Benefits.
The VA’s constituents are America’s veterans, service members, and their eligible spouses, to whom the VA offers both purchase and refinance loans at competitive rates. VA loans require low or no down payments and don’t require private mortgage insurance. Instead, the VA charges a funding fee at loan closing that can be rolled into the loan amount. VA also offers streamline and cash-out refinances that allow veterans to tap into their home equity to take care of concerns like paying off debt, funding school, or making home improvements. The VA also offers loans specifically for Native American veterans to finance the purchase, construction, or improvement of homes on Federal Trust Land, or reduce the interest rate on an existing VA loan through its Native American Direct Loan (NADL) Program. Adapted Housing Grants In addition to loans, the VA offers veterans permanent and total service-connected disability grants toward the purchase of construction of an adapted home or to modify an existing home to account for their disability.
The VA serves a politically sensitive constituency: service members and veterans, who have earned this benefit through their service to the United States. As a result, the VA is often at risk of unsolicited legislative mandates. Recent examples include the Blue Water Navy Vietnam Veterans Act of 2019 (PL 116-23) which mandated changes in the funding fees charged on VA loans, and the Economic Growth, Regulatory Relief, and Consumer Protection Act (Section 309 of PL 115-174) which established seasoning, recoupment, and net tangible benefit requirements for certain refinance transactions. Additionally, the Department typically issues guidance through Regulation and Circulars, which are cumbersome and difficult to get published, especially with a chronic staffing shortage. Lenders need to understand that the VA guaranty is limited to 25% of the loan amount, in contrast to FHA, in which mortgage insurance covers the entire loan. This difference is significant given that severity rates in foreclosure sales are often greater than the 25% guaranty. Lastly, the Department views its loan guaranty program as a benefit earned by the veteran, and as such has a bias toward unwritten flexibilities, if they benefit the veteran. Generally, these exceptions are obtained through dialogue with the appropriate regional loan center.
The USDA’s Rural Development Agency offers grants, loans and loan guarantees to help create jobs and support economic development and essential services such as housing; health care; first responder services and equipment; and water, electric and communications infrastructure.
US Department of Agriculture — Rural Development
Sources 1. rd.usda.gov - About RD 2. usda.gov- Grants and Loans 3. rd.usda.gov - Programs & Services 4. usda.gov - Strategic Goals
As an appropriated agency located in the Executive branch, it is subject to oversight and policy direction from the White House (NEC, CEA) and OMB. It also must report to Congress. USDA-RD coordinates with the other government housing agencies to align programs where possible. Lenders are a critical part of the guaranteed loan program, as they originate and service USDA-RD guaranteed mortgages.
Under Secretary for Rural Development.
Providing homeownership opportunities to low- and moderate-income rural Americans through several loan, grant, and loan guarantee programs as well as rental assistance. Focusing on the residential housing activities, Rural Development’s programs and services include:
While USDA-RD is a relatively small player in mortgage lending, it nevertheless has an important mission to help rural residents buy or rent safe, affordable housing, and make health and safety repairs to their homes. The borrowers are typically in underserved areas. USDA-RD has been working over the last several years to modernize and streamline its programs, in particular the Single Family Housing Guaranteed Loan Program.
- Single Family Housing Guaranteed Loan Program - Single Family Housing Direct Home Loans - Single Family Housing Repair Loans and Grants - Multifamily Housing Direct Loan and Grant Program - Multifamily Housing Loan Guarantees - Multifamily Housing Rental Assistance
Housing Assistance
Rural Development Loan and Grant Assistance
Funding projects that bring housing and community facilities while promoting development of renewable energy and energy efficiency improvements. Rural Development works with low-income individuals, state, local and Indian tribal governments, etc.
- Ensure USDA programs are delivered efficiently, effectively, and with integrity and a focus on customer service - Maximize the ability of American agricultural producers to prosper by feeding and clothing the world - Promote American agricultural products and exports - Facilitate rural prosperity and economic development - Strengthen the stewardship of private lands through technology and research - Foster productive and sustainable use of our National Forest System Lands - Provide all Americans access to a safe, nutritious and secure food supply
Strategic Goals (FY 2018-2022)
Providing homeownership opportunities to low- and moderate-income rural Americans through several loan, grant, and loan guarantee programs as well as rental assistance. Focusing on the residential housing activities, Rural Development’s programs and services include: - Single Family Housing Guaranteed Loan Program - Single Family Housing Direct Home Loans - Single Family Housing Repair Loans and Grants - Multifamily Housing Direct Loan and Grant Program - Multifamily Housing Loan Guarantees - Multifamily Housing Rental Assistance
Other Relevant Information Strategic Goals (FY 2018-2022)
The CFPB empowers consumers with the information they need to make financial decisions that are in their own best interests and those of their families. Its purpose is to promote fairness and transparency for mortgages, credit cards, and other consumer financial products and services, by setting clear, consistent rules that allow banks and other consumer financial services to operate on a level playing field and that let consumers see clearly the costs and features of products and services.
Sources 1. federalregister.gov - CFPB 2. consumerfinance.gov - Mortgage Help 3. consumerfinance.gov - Complaint 4. consumerfinance.gov - The Bureau 5. consumerfinance.gov - Creating the Bureau
Consumers who benefit from the transparency and accountability. Lenders and financial services companies who are subject to its regulations and periodic examinations. FHFA, HUD, VA, RHS who have to be aware of CFPB regulations when making their own policy changes or issuing their own regulations as they relate to mortgage finance.
Director, Presidential appointee.
The CFPB is an independent bureau that regulates consumer financial products and services to ensure consumers are treated fairly and are fully aware of all the terms and conditions of the financial products and services they choose to buy and use. CFPB conducts examinations of lenders and other financial services providers to ensure compliance with its regulations. The CFPB also accepts consumer complaints and ensures those complaints are addressed by the companies. CFPB also uses the data gathered from its complaints database to glean insights into problems consumers are having in the marketplace. This data informs rulemaking, examination procedures and actions the bureau may take.
FHFA is an independent agency, established by the Housing and Economic Recovery Act of 2008 (HERA), and is responsible for the effective supervision, regulation, and housing mission oversight of Fannie Mae, Freddie Mac (the Enterprises) and the Federal Home Loan Bank System, which includes the 11 Federal Home Loan Banks (FHL Banks) and the Office of Finance. Since 2008, FHFA has also served as conservator of Fannie Mae and Freddie Mac. It is an independent agency.
Sources 1. fhfa.gov - About Us 2. fhfa.gov - About Us
Fannie Mae, Freddie Mac, and Federal Home Loan Banks are all regulated by the FHFA. Treasury, as the holder of the warrants, impacts the FHFA conservatorship of the GSEs. The FHFA Director is a member of the Financial Stability Oversight Council (FSOC).
In addition to prudential supervision and regulation, FHFA also oversees the conservatorships of the GSEs, Fannie Mae and Freddie Mac to ensure that the GSEs:
A major source of concern is when or if the GSEs ever get out of conservatorship, and if they do, what form they will take, what activities they will engage in, and importantly, whether or not they will retain federal backing (either implicit or explicit) for the MBS after they exit conservatorship.
- Focus on their core mission responsibilities to foster competitive liquid, efficient, and resilient (CLEAR) national housing finance markets that support sustainable homeownership and affordable rental housing - Operate in a safe and sound manner appropriate for entities in conservatorship - Prepare for their respective exits from the conservatorships
FHFA also regulates the FHL Banks. It conducts on-site annual examinations and off-site monitoring of the FHL Banks, and oversees their affordable housing and community investment activities.
In addition to prudential supervision and regulation, FHFA also oversees the conservatorships of the GSEs, Fannie Mae and Freddie Mac to ensure that the GSEs: - Focus on their core mission responsibilities to foster competitive liquid, efficient, and resilient (CLEAR) national housing finance markets that support sustainable homeownership and affordable rental housing - Operate in a safe and sound manner appropriate for entities in conservatorship - Prepare for their respective exits from the conservatorships FHFA also regulates the FHL Banks. It conducts on-site annual examinations and off-site monitoring of the FHL Banks, and oversees their affordable housing and community investment activities.