The Federal Housing Finance Agency (FHFA) has released the 2022 scorecards for Fannie Mae, Freddie Mac (the Enterprises), and Common Securitization Solutions, LLC (CSS).
The scorecards are designed to hold the Enterprises and CSS accountable for achieving their core mission requirements, promoting sustainable and equitable access to affordable housing, and operating in a safe and sound manner.
According to the 2022 scorecard, each entity will be assessed using the following criteria:
- Each Enterprise’s products and programs foster sustainable and equitable housing finance markets that support safe, decent, and affordable homeownership and rental opportunities.
- Each Enterprise conducts business in a safe and sound manner.
- Each Enterprise meets expectations under all FHFA requirements, including those pertaining to capital, liquidity, and credit risk transfer.
- Each Enterprise continues to manage operations while in conservatorship in a manner that preserves and conserves assets through the prudent stewardship of Enterprise resources.
- Each Enterprise cooperates and collaborates with FHFA to meet the conservator’s priorities, directives, and guidance throughout the course of the year.
- Each Enterprise delivers work products that are high quality, thorough, creative, effective, and timely, and that consider effects on borrowers and renters, the Enterprises, the industry, and other stakeholders.
- Each Enterprise ensures that diversity, equity, and inclusion remain top priorities in strategic planning, operations, and business development.
“The 2022 scorecard will better position the Enterprises to support the housing market throughout the economic cycle,” FHFA acting Director Sandra Thompson said in a release. “Key to the Enterprises fulfilling their statutory mandates is their ability to advance sustainable and affordable homeownership and rental housing opportunities, and to improve their capital position by transferring credit risk away from the taxpayer.”
To promote sustainable and equitable access to affordable housing, the Enterprises and CSS should take significant actions to ensure all borrowers and renters have equitable access to long-term affordable housing opportunities.
Specific actions include developing strategies to support sustainable homeownership and affordable rental housing; creating high-quality equitable housing finance plans and meaningful actions to achieve the goals and objectives of the plans; and updating the current pricing framework to increase support for core mission borrowers, while ensuring a level playing field for small and large sellers, fostering capital accumulation, and achieving viable returns on capital.
To ensure the Enterprises are operating their business in a safe and sound manner, the scorecard states the Enterprises should be resilient to operational, market, credit, economic, and climate risks, as well as transfer a significant amount of credit risk to private investors, reducing risk to taxpayers.
The Enterprises should address examination and supervision findings promptly; maintain liquidity at levels requirement by the FHFA and sufficient to sustain Enterprise operations through severe stress events; maintain effective risk management systems appropriate for entities that need to minimize risk to capital as they rebuild capital buffers; and continue to ensure a successful transition away from LIBOR to approved alternative reference rates by continuing systems development and announcing plans for the transition of legacy products.
CSS also is required to operate in a safe and sound manner in support of Enterprise securitization activities.