FHFA Gives GSEs Their Marching Orders for 2014

WASHINGTON, DC—As we reported he would earlier this week, Federal Housing Finance Agency Director Melvin L. Watt gave his first major public speech as agency director, and yes, he released the long-awaited 2014 Scorecard for the GSEs at the event, as well as the new Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac.

The FHFA is maintaining the dollar volume of new multifamily business for each enterprise at or below the 2013 caps, except for affordable housing loans, loans to small multifamily properties and loans to manufactured housing rental communities.

These loans--affordable housing, small multifamily properties and manufactured housing rental community loans—are not to be counted in the production cap imposed on the multifamily business line. In short, Willy Walker, CEO of Walker & Dunlop, essentially nailed it in his recent earnings call remarks.

The FHFA has also mandated that the GSEs step up their risk-transfer transactions, such as Freddie Mac's Structured Agency Credit Risk (STACR) program and Fannie Mae's C-Series. Specifically, it is requiring that each GSE triple the credit risk transferred compared to last year's requirement.

This year, the FHFA also wants each GSE to "execute a minimum of two different types of transactions."

The FHFA also plans to explore whether the private market has the appetite for even more risk and at what cost, it said in its strategic plan. At this stage, though, it is not requiring either GSE to change its basic transaction structure as part of this evaluation.

The scorecard and strategic guidance are part of a larger push by the Obama administration to nudge along the housing recovery, which has shown recent signs of sputtering. In related news, the Wall Street Journal reports that six agencies, including the FHFA, will loosen some of the more onerous lending criteria for single-family homes with new rules that reverse earlier requirements for large down payments for certain types of mortgage-backed securities and other underwriting criteria.