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NAR submitted a comment letter to the Federal Housing Finance Agency (FHFA) in response to its request for input on changes to the 2020 enterprise regulatory capital framework (ERCF), or capital rule.
The reproposed rule makes important changes, which REALTORS® agree with, that allow the GSEs to continue to offload credit risk to private investors through CRT deals and avoids incentives that would have encouraged the GSEs to finance riskier mortgages. Both changes reduce risk at the GSEs and help them perform their Congressionally-chartered duties.
However, the NAR believes the ERCF must be further refined:
- The buffers included in the risk-based rule remains too high;
- The minimum risk weight for single family loans and the minimum for CRT are too high;
- The counter cyclical buffer is problematic;
- The FHFA rule does not address the potential impact of an explicit guarantee on the Enterprises’ capital requirements; and
- The FHFA must be address the impact on fees of a risk-based capital rule for entities with charter obligations.
The FHFA’s leadership has suggested that the recent reproposal is the start of a longer process of refinement.
NAR will work with the FHFA to improve the rule and ensure a steady flow of affordable credit to credit worthy borrowers.