Rep. French Hill (R-Ark.), ranking member of the Housing Community Development, and Insurance Subcommittee on the House Financial Services Committee, along with nine other Republican committee members, sent a letter to Federal Housing Finance Agency (FHFA) Director Sandra Thompson calling for greater oversight of Fannie Mae and Freddie Mac.
In the letter, the ten Republicans wrote that Fannie Mae and Freddie Mac (the Enterprises) “have a history of venturing into new activities and product offerings that go well beyond their congressionally approved roles in the secondary market.”
This statement by the representatives can be read as more than a call for greater oversight for Thompson and the FHFA. It can also be read as a nod to the Supreme Court’s recent W. Va. v. EPA decision, which legal experts have perceived as a start to the court’s intent to reign in agency activity that does not have “clear congressional authority.” Though the structure of the Enterprises and the governments conservatorship have recently been upheld by the courts in Collins v. Yellen, this new 6-3 conservative-leaning court has not yet defined how the Enterprises are subject to administrative rules and laws while under the conservatorship.
The representatives continued, “Therefore, we strongly urge you to take one of your first actions as the director to finalize the long overdue rulemaking on Prior Approval of Enterprise Products, which was proposed in October 2020 and would ensure there is adequate oversight and transparency around new products and activities the Enterprises bring into the market.”
The proposal they are referring to was initially proposed during the Trump administration and was abandoned by the Biden administration. The rule would replace a 2009 interim rule and would require the Enterprises to obtain approval from the FHFA director for any new product and provide prior notice to the FHFA director of any new activity.
The representatives expressed a clear concern that these expansive new activities by the Enterprises are infringing upon private sector activities which they were never meant to, or permitted, to engage.
“As the regulator and conservator of the Enterprises, the FHFA must conduct proper oversight of their operation and ensure that all their activities comply with their congressional charter,” the letter concludes. “Pilot programs should not be operating as back doors for the Enterprises to expand into areas already being served by the private sector or to push a housing policy agenda that introduces unacceptable risk to taxpayers.”