Dodd-Frank News Center

OIG Examines Oversight of GSE Business Decisions

This story appeared in Bank Digest.

The FHFA's Office of Inspector General has reported on its audit of the FHFA's process for approving business decisions of government-sponsored enterprises Fannie Mae and Freddie Mac. Although the agency broadly delegated most of its conservatorship authority back to the GSEs in 2008, they are required to obtain FHFA approval for selected business decisions, such as those involving legal settlements over $50 million and risk limit increases.

GAO Says Agencies Could Improve Effectiveness of Foreclosure Mitigation Efforts

By Serena Lynn, Editor, the CCH Federal Banking Law Reporter and Bank Digest.

Historically high foreclosure rates remain a major barrier to the current economic recovery. To assist policymakers and housing market participants in evaluating foreclosure mitigation efforts, the Government Accountability Office has issued a report examining:  

1. the federal and nonfederal response to the housing crisis;      

2. the current condition of the U.S. housing market; and    

3. opportunities to enhance federal efforts.      

 

FHA Reform Needed to Fix Housing Market

This story appeared in Bank Digest.

Following a hearing (webcast) on the state of the housing market conducted by the Senate Banking Committee, Sen. David Vitter, R-La., called for reform of the Federal Housing Adminstration to make sure the agency can remain solvent without a federal bailout. Vitter stated that the FHA has been violating the congressionally mandated ratio of capital it must keep in its mortgage insurance fund since 2009. “The FHA has a responsibility to manage their funds responsibly and keep their books in order,” Vitter said. He added that he does not “believe that giving even more power to the FHA is going to fix what's broken in the housing market.”

Financial Services Subcommittee Approves Bills to Improve Fiscal Health of FHA, Affordable Housing Programs

This story appeared in Bank Digest.

The Insurance, Housing and Community Opportunity Subcommittee has approved bills that are intended to provide the Federal Housing Administration with the tools it needs to shore up the health of the FHA mortgage insurance fund, improve the efficiency and operations of the Section 8 housing voucher program, and harmonize conflicting definitions of “homeless person” so homeless children can receive needed housing assistance.

Corker Criticizes Effort to Raise Limit on Mortgages Covered by FHFA

This story appeared in Bank Digest.

Banking Committee member Bob Corker, R-Tenn., has called an effort to renew higher loan limits for mortgages backed by the Federal Housing Administration “unconscionable,” asserting that it puts taxpayer money at risk and that Congress should be working on restoring the market for private home financing. Corker instead pushed consideration of the Residential Mortgage Market Privatization and Standardization Act (S. 1834) that he recently introduced, saying that it would end Fannie Mae and Freddie Mac and encourage private funding.

House Committee Examining Fannie Mae and Freddie Mac Executive Compensation

This story appeared in Bank Digest.

The Oversight and Government Reform Committee is examining executive compensation at Fannie Mae and Freddie Mac with Chairman Darrell Issa, R-Calif., releasing a report entitled, “Government-Sponsored Moguls: Executive Compensation at Fannie Mae and Freddie Mac.” The report examines: the enterprises' compensation structure and bonuses; conservatorship status; Federal Housing Finance Agency oversight; and taxpayer exposure to the mortgage market. According to Issa, the report explains “fundamental criticisms of executive compensation decisions for Fannie Mae and Freddie Mac.” The committee also held a hearing November 16 entitled “Pay for Performance: Should Fannie and Freddie Executives Be Receiving Millions in Business?”

House Members Praise Senate Approval of Higher Conforming Loan Limits

This story appeared in Bank Digest.

Reps. Gary G. Miller, R-Calif., and Brad Sherman, D-Calif., both senior members of the House Financial Services Committee, praised the Senate for passage of the Menendez/Isakson Amendment reinstating higher limits on loans made in highcost areas that are purchased by Fannie Mae and Freddie Mac (GSEs) or that are insured by the Federal Housing Administration (FHA). “I am extremely pleased that the Senate has recognized the importance of reinstating higher mortgage loan limits to stabilizing our nation’s housing market,” said Miller. Sherman noted, “The Senate has taken a positive step to help housing prices, and I am committed to doing everything I can to push the House to support restoring the higher conforming loan limits within the 2012 appropriations process.”

DeMarco Responds to S&P's Rating Action

This story appeared in Bank Digest.

In response to Standard & Poor's lowering of the rating of long-term securities issued by the U.S. government, federal agencies, and other entities, including Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, FHFA Acting Director Edward J. DeMarco said, “the risk weights for Treasury securities and other securities issued or guaranteed by the U.S. Government, government agencies, and government-sponsored entities do not change for purposes of calculating risk-based capital.” DeMarco stated that “The government commitment to ensure that Fannie Mae and Freddie Mac have sufficient capital to meet their obligations, as provided for in the Treasury's Senior Preferred Stock Purchase Agreement with each Enterprise, remains unaffected by the Standard and Poor's action.”

Regulators Propose Incentive Compensation Rules

This story appeared in Bank Digest.

The federal bank, thrift, credit union, securities and housing finance regulatory agencies have jointly proposed a rule intended to prohibit incentive-based compensation arrangements that encourage inappropriate risk taking by covered financial institutions, described as compensation that is excessive or that may lead to material losses. The specific requirements of the proposal would vary based on the size of the affected institution, although institutions with total assets that do not exceed $1 billion would be exempt. The rule, required by the Dodd-Frank Act, is intended to address the perceived problem of compensation structures that do not properly align incentives and risk. This misalignment has been identified as one of the causes of the financial crisis that began in 2008.

End of Mortgage Relief Programs Move Step Closer to Passage

By Richard Roth, J.D., Editor, the CCH Federal Banking Law Reporter, CCH Bank Compliance Guide, Bank Digest co-author, Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis.

The House of Representatives has passed a bill that would end the FHA Refinance Program, which is intended to use funds from the Troubled Asset Relief Program to help consumers avoid losing their homes to mortgage foreclosures. According to House Financial Services Committee Chairman Spencer Bachus, R-Ala., and Rep. Judy Biggert, R-Ill., the program has been ineffective in providing assistance and actually is a taxpayer bailout of mortgage lenders. Speaker John Boehner, R-Ohio, also praised the cost savings. The White House has said that the bill, if passed, will be vetoed.