FHFA Director Watt Testifies Before the Senate

Yesterday, Mel Watt, Director of the Federal Housing Finance Agency (FHFA), testified in what was presumably his final address to Congress in his current role, detailing the current state of conservatorship as well as upcoming agency proposals. His testimony was covered by Inside Mortgage Finance and attended by SFIG policy staff.

In his opening statement before the Senate Committee on Banking, Housing and Urban Affairs, Director Watt detailed three main challenges facing the FHFA regarding housing finance reform: managing the GSEs in their current state and planning for the future, utilizing risk pricing that ensures the GSEs function in a safe and sound manner, and affordability and access to credit. Director Watt expressed concern that the decade long conservatorship would continue for the foreseeable future, especially with no long term plan in place. In his testimony, Director Watt noted that the FHFA will release information on and request public comment for the Conservatorship Capital Framework (CCF), which the GSEs have previously noted in public filings is the overall risk measurement framework for evaluating Freddie Mac’s and Fannie Mae’s risk management and business decisions during conservatorship. Director Watt also detailed a number of programs aimed at improving affordability and fulfilling the Duty-To-Serve statutory mandate of the GSEs.

During the question-and-answer portion of the hearing, Senators asked the Director a number of questions, primarily concerning capital standards, the Duty-To-Serve, affordability, and credit score competition. Of note, Director Watt confirmed that the UMBS was still on track for a June 2019 launch date, that the Conservatorship Capital Framework was still under development and that decisions on credit score competition were “by far the biggest challenge” he has faced as FHFA Director.

To follow up with SFIG staff concerning the testimony, or would like to join our GSE Reform Task Force, please contact William.Innes@sfindustry.org.

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