Hello, LOs!
Before the end of the Supreme Court's term in June, a decision will be released that could upend the leadership of the Federal Housing Finance Administration.
Here's how it would impact lenders.
The FHFA oversees Fannie Mae and Freddie Mac's operations. Together, the two buy and securitize about $5.5 trillion in mortgages.
The FHFA's structure gives its director — Trump-appointee and vocal GSE critic Mark Calabria — an extraordinary amount of control over the housing market, writes Don Layton, who was the CEO of Freddie Mac from 2012 until 2019.
"This formula gives that one individual unprecedented and almost unaccountable power over the GSEs and, through them, over the country's housing finance system," said Layton. He notes that some have likened the FHFA director to a '"mini-President" for housing finance,"' except for the part about being accountable to voters.
Currently, not even the president can fire Calabria without cause. But a pending Supreme Court lawsuit asks whether that arrangement is constitutional.
If the Supreme Court were to find that it is not constitutional for the FHFA to be run by an independent director, it would give the Biden administration strong leverage to stick its nose into agency operations.
How could that directly impact the mortgage industry?
Were the Biden administration to have such power over the FHFA, it could, obviously, appoint a director more amenable to its priorities. And there's more.
Another change it might push for is a renewal of the GSE Patch, which is currently set to expire on July 1. The expiration date currently conflicts with the CFPB's Qualified Mortgage rule compliance date delay.
The GSE Patch bestows QM status to loans approved by the GSEs' underwriting platforms, even if they exceed the 43% DTI threshold. With that status comes crucial protection from litigation in case of foreclosure — protection that the CFPB may be looking to peel back.
A similar decision last summer found the CFPB's structure to be unconstitutional. Housing finance experts expect the Supreme Court to reach the same conclusion about the FHFA.
The court releases decisions each Monday at 10:00 a.m., although there's no telling what the specific timing will be.
So, where do you peg Calabria's chances of hanging on, if the Supreme Court gives Biden the power to sack him? Send me your thoughts at gkromrei@housingwire.com!
Georgia Kromrei
Senior Mortgage Reporter
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