Federal Housing Finance Reform
| Citation | 84 FR 12479 |
| Record Number | 2019-06441 |
| Published date | 01 April 2019 |
| Section | Presidential Documents |
| Court | Executive Office Of The President |
Federal Register, Volume 84 Issue 62 (Monday, April 1, 2019)
[Federal Register Volume 84, Number 62 (Monday, April 1, 2019)]
[Presidential Documents]
[Pages 12479-12482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06441]
[[Page 12477]]
Vol. 84
Monday,
No. 62
April 1, 2019
Part VThe President-----------------------------------------------------------------------
Memorandum of March 27, 2019--Federal Housing Finance Reform
Presidential Documents
Federal Register / Vol. 84 , No. 62 / Monday, April 1, 2019 /
Presidential Documents
___________________________________________________________________
Title 3--
The President
[[Page 12479]]
Memorandum of March 27, 2019
Federal Housing Finance Reform
Memorandum for the Secretary of the Treasury[,] the
Secretary of Agriculture[,] the Secretary of Housing
and Urban Development[,] the Secretary of Veterans
Affairs[,] the Director of the Office of Management and
Budget[,] the Director of the Bureau of Consumer
Financial Protection[,] the Director of the Federal
Housing Finance Agency[,] the Assistant to the
President for Economic Policy[, and] the Assistant to
the President for Domestic Policy
The housing finance system of the United States is in
urgent need of reform. During the financial crisis of
2008, the Federal National Mortgage Association (Fannie
Mae) and the Federal Home Loan Mortgage Corporation
(Freddie Mac)--collectively known as the Government-
sponsored enterprises (GSEs)--suffered significant
losses due to their structural flaws and lack of
sufficient regulatory oversight. To prevent their
failure, the GSEs received support from the Federal
Government and were placed into conservatorship in
September 2008. The Housing and Economic Recovery Act
of 2008 enacted important reforms to the supervision,
oversight, risk management, and governance of the GSEs.
The GSEs remain in conservatorship, however, and the
housing finance system continues to face significant
and fundamental challenges. To date, the GSEs are the
dominant participants in the housing finance system and
lack real competitors. The lack of comprehensive
housing finance reform since the financial crisis of
2008 has left taxpayers potentially exposed to future
bailouts, and has left the Federal housing finance
programs at the Department of Housing and Urban
Development potentially overexposed to risk and with
outdated operations. Accordingly, it is time for the
United States to reform its housing finance system to
reduce taxpayer risks, expand the private sector's
role, modernize government housing programs, and make
sustainable home ownership for American families our
benchmark of success. In order to resolve these ongoing
challenges and by the authority vested in me as
President by the Constitution and the laws of the
United States of America, I hereby direct the
following:
Section 1. Framework to Reform the GSEs. (a) The
Secretary of the Treasury is hereby directed to develop
a plan for administrative and legislative reforms
(Treasury Housing Reform Plan) to achieve the following
housing reform goals:
(i) Ending the conservatorships of the GSEs upon the completion of
specified reforms;
(ii) Facilitating competition in the housing finance market;
(iii) Establishing regulation of the GSEs that safeguards their safety and
soundness and minimizes the risks they pose to the financial stability of
the United States; and
(iv) Providing that the Federal Government is properly compensated for any
explicit or implicit support it provides to the GSEs or the secondary
housing finance market.
(b) The Treasury Housing Reform Plan shall include
reform proposals to achieve the following specific
objectives:
(i) Preserving access for qualified homebuyers to 30-year fixed-rate
mortgages and other mortgage options that best serve the financial needs of
potential homebuyers;
[[Page 12480]]
(ii) Maintaining equal access to the Federal housing finance system for
lenders of all sizes, charter types, and geographic locations, including
the maintenance of a cash window for loan sales;
(iii) Establishing appropriate capital and liquidity requirements for the
GSEs;
(iv) Increasing competition and participation of the private sector in the
mortgage market, including by authorizing the Federal Housing Finance
Agency (FHFA) to approve guarantors of conventional mortgage loans in the
secondary market;
(v) Mitigating the risks undertaken by the GSEs, including by altering, if
necessary, their respective policies on loan limits, program and product
offerings, credit underwriting parameters, and the use of private capital
to transfer credit risk;
(vi) Recommending appropriate size and risk profiles for the GSEs' retained
mortgage and investment portfolios;
(vii) Defining the role of the GSEs in multifamily mortgage finance;
(viii) Defining the mission of the Federal Home Loan Bank system and its
role in supporting Federal housing finance;
(ix) Evaluating, in consultation with the Secretary of Housing and Urban
Development and the Director of the Bureau of Consumer Financial
Protection, the ``QM Patch,'' whereby the GSEs are exempt from certain
requirements of the Qualified Mortgage (QM) determination;
(x) Defining the GSEs' role in promoting affordable housing without
duplicating support provided by the Federal Housing Administration (FHA) or
other Federal programs; and
(xi) Setting the conditions necessary for the termination of the
conservatorships of the GSEs, which shall include the following conditions
being satisfied:
(A) The Federal Government is fully compensated for the explicit and
implicit guarantees provided by it to the GSEs or any successor entities in
the form of an ongoing payment to the United States;
(B) The GSEs' activities are restricted to their core statutory mission
and the size of investment and retained mortgage portfolios are
appropriately limited; and
(C) The GSEs are subjected to heightened prudential requirements and
safety and soundness standards, including increased capital requirements,
designed to prevent a future taxpayer bailout and minimize risks to
financial stability.
(c) For each reform included in the Treasury
Housing Reform Plan, the Secretary of the Treasury must
specify whether the proposed reform is a
``legislative'' reform that would require congressional
action or an ``administrative'' reform that could be
implemented without congressional action. For each
``administrative'' reform, the Treasury Housing Reform
Plan shall include a timeline for implementation.
(d) In developing the Treasury Housing Reform Plan,
the Secretary of the Treasury shall consult with the
Secretary of Agriculture, the Secretary of Housing and
Urban Development, the Secretary of Veterans Affairs,
the Director of the Office of Management and Budget,
the Director of the Bureau of Consumer Financial
Protection, the Director of the FHFA, the Assistant to
the President for Economic Policy, and the FHFA's
Federal Housing Finance Oversight Board.
(e) The Treasury Housing Reform Plan shall be
submitted to the President for approval, through the
Assistant to the President for Economic Policy, as soon
as practicable.
Sec. 2. Framework to Reform the Programs of the
Department of Housing and Urban Development, the FHA,
and the Government National Mortgage
[[Page 12481]]
Association (GNMA). (a) The Secretary of Housing and
Urban Development is hereby directed to develop a plan
for administrative and legislative reforms (HUD Reform
Plan) to achieve the following housing reform goals:
(i) Attempting to ensure that the FHA and GNMA assume primary
responsibility for providing housing finance support to low- and moderate-
income families that cannot be fulfilled through traditional underwriting;
(ii) Reducing taxpayer exposure through improved risk management and
program and product design; and
(iii) Modernizing the operations and technology of the FHA and GNMA.
(b) The HUD Reform Plan shall include reform
proposals to achieve the following specific objectives:
(i) Addressing the financial viability of the Home Equity Conversion
Mortgage program;
(ii) Assessing the risks and benefits associated with providing assistance
to first-time homebuyers, including down-payment assistance;
(iii) Defining the appropriate role of the FHA in multifamily mortgage
finance;
(iv) Diversifying FHA lenders through increased participation by registered
depository institutions;
(v) Enhancing GNMA program participation requirements and standards to
ensure its safety and soundness and to protect borrower and investor
interests; and
(vi) Reducing abusive and unsound loan origination or servicing practices
for loans in the GNMA program, including, if appropriate, by providing for
cooperation with other loan program sponsors and regulators.
(c) For each reform included in the HUD Reform
Plan, the Secretary of Housing and Urban Development
shall specify whether the proposed reform is a
``legislative'' reform that would require congressional
action or an ``administrative'' reform that could be
implemented without congressional action. For each
``administrative'' reform, the HUD Reform Plan shall
include a timeline for implementation.
(d) In developing the HUD Reform Plan, the
Secretary of Housing and Urban Development shall
consult with the Secretary of the Treasury, the
Secretary of Agriculture, the Secretary of Veterans
Affairs, the Director of the Office of Management and
Budget, the Director of the Bureau of Consumer
Financial Protection, the Assistant to the President
for Economic Policy, and the Assistant to the President
for Domestic Policy.
(e) The HUD Reform Plan shall be submitted to the
President for approval, through the Assistant to the
President for Economic Policy, as soon as practicable.
Sec. 3. General Provisions. (a) Nothing in this
memorandum shall be construed to impair or otherwise
affect:
(i) the authority granted by law to an executive department or agency, or
the head thereof; or
(ii) the functions of the Director of the Office of Management and Budget
relating to budgetary, administrative, or legislative proposals.
(b) This memorandum shall be implemented consistent
with applicable law and subject to the availability of
appropriations.
[[Page 12482]]
(c) This memorandum is not intended to, and does
not, create any right or benefit, substantive or
procedural, enforceable at law or in equity by any
party against the United States, its departments,
agencies, or entities, its officers, employees, or
agents, or any other person.
(d) The Secretary of the Treasury is authorized and
directed to publish this memorandum in the Federal
Register.
(Presidential Sig.)
THE WHITE HOUSE,
Washington, March 27, 2019
[FR Doc. 2019-06441
Filed 3-29-19; 11:15 am]
Billing code 4811-33-P
