The Biden administration has appointed Sandra Thompson, acting director of the federal regulator of Fannie Mae and Freddie Mac, for a full five-year term, ending speculation that a consumer advocate was pushing Fannie and Freddie’s transformation into services regulated audiences could get the job instead.

After appointing Thompson as acting director of the Federal Housing Finance Agency (FHFA) in June, the White House reportedly considered appointing Mike Calhoun, chairman of the Center for Responsible Lending, as the agency’s permanent head.

Last year, the Center for Responsible Lending released a report calling for the FHFA to continue to regulate Fannie and Freddie as if they were public services, “pooling risks nationwide” and offering “broad access to affordable mortgages nationwide ”.

It’s a direction many conservatives oppose, who were dismayed when the Biden administration derailed Republicans’ plans to recapitalize and privatize Fannie and Freddie.

Congress could still decide that the public utility approach – also promoted by the National Association of Realtors – is the best course of action. In the meantime, the Biden administration has brought some certainty to the mortgage industry by appointing Thompson, a seasoned regulator with a long history, as the permanent director of the FHFA.

The Mortgage Bankers Association welcomed Thompson’s appointment, saying “Thompson’s deep expertise as a regulator and her experience in real estate finance makes her the perfect fit” to lead the agency. The American Bankers Association issued a similar statement, praising Thompson’s “good understanding of the primary and secondary mortgage markets, as well as his extensive experience in financial regulatory matters.”

In addition to Fannie Mae and Freddie Mac, the FHFA oversees the Federal Home Loan Bank System and is responsible for overseeing the $ 7.2 trillion mortgage finance market.

Thompson – whose candidacy was reportedly backed by influential California Democratic Representative Maxine Waters, chair of the House Financial Services Committee – has more than four decades of experience in financial regulation and risk management.

Prior to joining the FHFA in 2013 as deputy director of the agency’s Division of Housing Mission and Goals, Thompson served for over 23 years with the Federal Deposit Insurance Corporation (FDIC), heading the program for review and application of the agency for risk management and consumer protection at the height of the financial crisis.

MBA chairman Bob Broeksmit noted that as interim director Thompson “addressed several major issues,” including waiving refinancing fees, extending pandemic flexibilities to borrowers, l Improving Fannie and Freddie’s new refinancing programs for low-income borrowers and overseeing their mission to create fair and sustainable solutions for affordable housing and rental opportunities.

“We hope this will be a quick confirmation process and look forward to continuing our work with Acting Director Thompson, FHFA and [Fannie and Freddie] to ensure a stable and robust secondary mortgage market for a wide variety of single and multi-family lenders, regardless of size or business model, ”Broeksmit said in a statement.

In September, the FHFA lifted controversial limits on purchases of mortgages by Fannie and Freddie with “several higher risk characteristics”, as well as loans secured by second homes and investment properties. The limits were put in place by the Trump administration, which intended to reduce Fannie and Freddie’s market share and help them raise capital so they could be privatized.

The FHFA ordered Fannie and Freddie to submit equitable housing finance plans by the end of the year demonstrating how they plan to help narrow the racial or ethnic property gap over the next three years. The plans – which take effect on January 1 – aim to identify and remove barriers to sustainable housing opportunities.

“For generations, discriminatory practices such as redlining have prevented communities of color from creating wealth through home ownership,” Thompson said at the time. “By identifying obstacles to equitable and sustainable housing finance opportunities and setting targets to overcome these obstacles, [Fannie and Freddie], compatible with security and soundness, can responsibly reduce the racial and ethnic disparities in home ownership and wealth that still exist today.

Separately, the FHFA has warned Fannie and Freddie that it wants at least 35% of the purchase loans made by mortgage giants over the next three years to go to low and very low income borrowers, against 30% today.

A record 2022 compliant loan limit increase next year could make it harder to meet those goals, with Fannie and Freddie allowed to buy and guarantee mortgages of up to $ 647,200 across much of the country, and nearly $ 1 million in 100 counties concentrated in nine metropolitan areas. .

One of the largest issuers of private label mortgage-backed securities, Redwood Trust, has warned that the higher loan limits needlessly extend the footprint of government-backed mortgage giants in markets better served by lenders private sector and undermine their mission of supporting affordable housing.

In a Nov. 25 editorial, Peter J. Wallison, an emeritus fellow of the conservative American Enterprise Institute, blamed Fannie and Freddie for the housing crisis and recession of 2007-09, saying they “did fall the housing market in the United States. market by reducing down payments and relaxing underwriting standards.

“Here we go,” Wallison wrote of the higher loan limits and affordable housing goals. “The only difference between what the administration is proposing and what caused the 2008 financial crisis is that the economy is already in an inflationary period, induced by the administration’s other policies.”

The Senate Banking Committee will hold a hearing on Thompson’s appointment, which must be confirmed by a Senate majority. Senate Banking Committee Chairman Senator Sherrod Brown, a Democrat from Ohio, said in a statement that Thompson “has refocused the regulation of [Fannie and Freddie] to ensure they fulfill their mission of providing safe and sustainable access to housing across the country. I look forward to having her nomination hearing soon and encourage my colleagues to support her nomination.

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