Choice Excerpts from Written Testimony of Sandra L. Thompson

Choice Excerpts from Written Testimony of Sandra L. Thompson Director Federal Housing Finance Agency Before the U.S. House of Representatives Committee on Financial Services “FHFA Oversight: Protecting Homeowners and Taxpayers”

Source: https://docs.house.gov/meetings/BA/BA00/20230523/116003/HHRG-118-BA00-Wstate-ThompsonS-20230523.pdf

Congress established the Federal Housing Finance Agency (FHFA or Agency) to protect the safety and soundness of the housing finance system and promote affordable and sustainable access to mortgage credit nationwide through the regulation and supervision of our regulated entities—Fannie Mae, Freddie Mac (together, the Enterprises), and the Federal Home Loan Bank System, which includes the 11 Federal Home Loan Banks (FHLBanks) and the Office of Finance.

As regulator and, in the case of the Enterprises, conservator, FHFA ensures that each of these steps is undertaken in a manner that furthers the safety and soundness of the regulated entities.

The Enterprises have continued to build capital and now maintain a combined net worth above $100 billion.

More broadly, the safety and soundness of the regulated entities is a key component of all policy decisions and other actions taken by FHFA.

The updated pricing framework will enable the Enterprises to continue building capital, thereby reducing the risk to taxpayers who have borne the financial burden of supporting them since they were placed into conservatorship in 2008.

Much of the updated pricing framework, as discussed below, is calibrated to the ERCF to help ensure that the Enterprises’ capital requirements and pricing framework are more closely aligned.

Risk-based pricing remains in effect, and the upfront fees are now more closely aligned with the return-on-capital targets set by FHFA.

FHFA has continued to engage with stakeholders on specific issues related to the pricing framework to ensure it meets our stated objectives of fostering capital accumulation at the Enterprises, achieving viable returns on capital, and increasing support for creditworthy firsttime homebuyers

Since entering conservatorship in 2008, the Enterprises have remained undercapitalized, and taxpayers, through the Treasury Department, continue to provide a financial backstop should the Enterprises confront significant losses. The updated pricing framework will better protect taxpayers in the long term and put the Enterprises on more durable footing, which will allow them to support affordable, sustainable mortgage credit across the economic cycle to the benefit of all Americans. And they will do so with a pricing framework that is more accurately aligned to the expected financial performance and risks of the loans they back.