The good news, however, is that the GSEs “substantially advanced” their conservatorship goals during 2015, according to the FHFA’s 2016 Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Solutions (CSS) released Thursday.
The 2016 Scorecard further expands on the three goals of the GSEs outlined in the FHFA’s Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac, which was published in May 2014. Those three goals are:
- maintaining (through a safe and sound manner) credit availability and foreclosure prevention activities for new and refinanced mortgages and fostering liquidity, competition, resilience, and effectiveness for housing markets;
- reducing risk to taxpayers while increasing the role of private capital in the market;
- and building a new single-family securitization structure for use by the GSEs and other secondary market participants.
“The progress Fannie Mae and Freddie Mac made in 2015 substantially advanced the goals set forth in our Conservatorship Strategic Plan and we expect to build on this progress in 2016,” FHFA Director Melvin L. Watt said. “The new Scorecard will guide Fannie Mae, Freddie Mac and Common Securitization Solutions as they continue working to foster liquidity and access to credit for creditworthy borrowers in the national housing finance markets in a safe and sound manner.”
On the first of the three goals—maintaining, in a safe and sound manner, credit availability and foreclosure prevention activities—the Enterprises are to continue to assess impediments to credit access and develop recommendations to address those barriers, including considering the use of automated underwriting systems and the possibility of the GSEs financing energy or water efficiency investments in both single- and multi-family properties. They will also be assessing the effectiveness of early delinquency counseling and homeownership education during 2015 and implementing those initiatives as appropriate, according to FHFA.
The Enterprises will also prepare for the expiration of both the Home Affordable Modification Program (HAMP) and Home Affordable Refinance Program (HARP) which is set to occur at the end of 2016. While the GSEs plan to continue to heavily promote HARP, they also plan to develop a high loan-to-value ratio refinance program that is scheduled to be implemented in January 2017 immediately after HARP and HAMP expire.
Another of the GSEs initiatives in line with the first goal is to continue to reduce the number of REO properties and deeply delinquent and non-performing loans (NPLs) in their single-family mortgage portfolios. Their goal is to submit a plan for FHFA’s approval that includes a broad NPL sales strategy, expanding offerings to multi-servicer pools, continuing to offer smaller pools that encourage participation from non-profits, and consideration for borrower outcomes.
On the goal of transferring credit risk, the GSEs plan to transfer credit risk on at least 90 percent of the unpaid principal balance (UPB) of newly acquired single-family mortgages in loan categories targeted for risk transfer. FHFA stated in the report: “Because the Enterprises’ single-family credit risk transfers have evolved into a core business practice, it is FHFA’s current expectation that single-family credit risk transfers will continue to be an ongoing conservatorship requirement. FHFA will adjust targets as necessary to reflect market conditions and economic considerations.”
On the Common Securitization Platform (CSP) and Single Securities, FHFA expects the GSEs and CSS to implement the following initiatives:
- Release 1—Implement CSP for Freddie Mac’s existing single-class securities in 2016; and
- Release 2—Implement the Single Security on the CSP for both Fannie Mae and Freddie Mac in 2018.
The GSEs’ goal is to continue to work together and with FHFA and CSS to meet both of these release timelines, working to build and test the CSP and implement the changes necessary to integrate the GSEs’ related systems and operations with the CSP.