After 50 bps fee kickback, FHFA will revise capital rule

The federal Housing Finance Agency (FHFA) will review the regulatory capital framework for companies in “near term,” officials said — after hearing from industry players since the unveiling of a new securities fee.

For now, however, the new 50 basis point fee levied on securities backed by one company and later backed by another is on the way. Despite the “extensive” engagement it said it has with stakeholders, the regulator said: Fannie Mae and Freddie Mac will charge the fee “as scheduled”. The implementation date of the new compensation was 1 July.

Agency officials also reiterated their support for the unified market for mortgage-backed securities.

“FHFA remains committed to the continued strength and resilience of the [uniform mortgage-backed securities] market, given the significant improvement in liquidity and stability that UMBS has provided to the To-Be-Announced (TBA) market,” a statement from the agency said Thursday evening.

Fannie Mae and Freddie Mac representatives declined to comment. A Fannie Mae spokesperson did not immediately respond to a request for comment.

The announcement of the fee sparked an immediate response from several people in the mortgage financing industry. Some in the industry speculated that the fee was: intended to subsidize core mission borrowers, but the FHFA soon rejected that theory: The FHFA said the move implemented the 2020 regulatory capital framework for companies, which assigned a 20% risk weight to such securities.

Industry stakeholders who opposed the fee said they expressed the willingness of the FHFA to listen to feedback

Still, that feedback did not delay the timeline for the implementation of the compensation. Sources close to investors in mortgage-backed securities have said that both GSEs began charging the fee almost immediately — ahead of the July 1 implementation date.

Some stakeholders said the fee contradicted the idea of ​​a unified mortgage-backed security, and would erode the system, which the GSEs implemented in 2019. Others called the imposition of the new fee a “money robbery.”

Researchers at the Municipal Institute, a progressive think tank, said the new fee would threaten the common security system for which FHFA officials have expressed support. The single-security approach had paved the way for long-term reform, Urban researchers wrote, leveling the playing field between Fannie Mae and Freddie Mac effects.

The new fee “could allow investors to pay more for Fannie Mae’s security, once again forcing Freddie Mac to pay lenders a premium to compensate for weaker investor demand for their security,” the researchers wrote.

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