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April 2022 — Legislative and Regulatory Update
This month, Fannie Mae and Freddie Mac earned $5.3 billion from a fee imposed on most refinanced mortgages; the Senate voted 53-47 to confirm Judge Ketanji Brown Jackson to a seat on the U.S. Supreme Court; and the Switzerland-based Financial Stability Board reported that the crypto-asset market could eventually pose risks to global financial stability.
Details about these and other developments are below.
HOUSING POLICY
Fannie Mae and Freddie Mac Earned $5.3 Billion from Adverse Market Fee
Fannie Mae and Freddie Mac (Fannie and Freddie) earned $5.3 billion from a 0.5 percent adverse market fee they charged on most refinanced mortgages during portions of 2020 and 2021. This revenue will pay for much of the cost of Fannie and Freddie’s programs that allowed at-risk homeowners to defer their monthly mortgage payments during the COVID-19 pandemic. They imposed the fee from October 2020 to July 2021.
Legislation passed in March 2020 enabled homeowners to defer mortgage payments for an initial year without penalty. The legislation also placed a moratorium on foreclosures. But deferring payments and foreclosure actions imposed significant costs to Fannie and Freddie. The estimated forbearance and foreclosure prevention programs will cost them $7 billion to $8 billion over the next four years. With the imposition of the adverse market fee, Fannie and Freddie will cover much of
these costs.
Key Leaders at Fannie Announce their Departures
Fannie's CEO, Hugh Frater, and Sheila Bair, the chair of its board, both announced they will resign from the mortgage finance company on May 1. Antony Jenkins, who is currently vice chair of the board’s nominating and corporate governance committee, will also resign May 1.
David Benson, Fannie's president, will serve as interim CEO and board member, although that decision is subject to regulatory approval. Fannie said it plans to conduct a national search for a permanent CEO.
Fannie's board also elected Michael Heid, who currently chairs the community responsibility and sustainability committee, to succeed Ms. Bair as chair of
the board.
BANKING AND ECONOMIC POLICY
Senate Confirms Jackson to Supreme Court
The U.S. Senate recently voted 53-47 to confirm Judge Ketanji Brown Jackson to a seat on the U.S. Supreme Court. She will replace Justice Stephen Breyer upon his retirement at the end of the current Supreme Court term. Ms. Jackson has been a judge on the D.C. Circuit Court of Appeals since 2021 and a federal district judge from 2013 to 2021.
SEC Commissioner Lee to Step Down
Securities and Exchange Commission (SEC) Commissioner Allison Herren Lee, a Democrat, recently announced that she will resign after her current term ends in June and a replacement is confirmed. Ms. Lee has served on the SEC since 2019.
Hsu Advocates for Bank-like Regulation of Stablecoins
Acting Comptroller of the Currency Michael Hsu recently called for establishing a framework for stablecoins that would focus on “stability, interoperability and separability,” and also take into account privacy, security and the need to prevent illicit finance.
Speaking at an industry event, Mr. Hsu suggested that well-regulated bank-issued stablecoins may be preferable to a Federal Reserve-issued Central Bank Digital Currency as policymakers consider the U.S. dollar’s international role.
Yellen Calls for ‘Appropriate Oversight’ for Digital Asset and
Crypto Firms
In related news, the regulation of cryptocurrencies and digital assets must keep pace with innovation to ensure financial stability and consumer protection, Treasury Secretary Janet Yellen said in recent remarks at an industry event.
“Our regulatory frameworks should be designed to support responsible innovation while managing risks, especially those that could disrupt the financial system and economy,” Ms. Yellen said.
Financial Stability Board: Crypto Assets Could Threaten Global Financial Stability
The crypto-asset market could eventually pose a threat to global financial stability, according to a recent report from the Switzerland-based Financial Stability
Board (FSB).
The fast-evolving nature of crypto assets, as well as their increasing interconnectedness with the traditional financial system could threaten global financial stability, the FSB warned. The international nature of crypto markets “also raise the potential for regulatory gaps, fragmentation or arbitrage,” according to
the report.
Americans Report High Satisfaction with Banks
Nine in 10 Americans with a bank account say they are “very satisfied” or “satisfied” with their primary bank, according to a new American Bankers Association/Morning Consult poll. A similar number—88 percent—also agreed that they have multiple options when selecting products and services such as bank accounts, loans and credit cards.
United States Adds 431,000 Jobs in March
The U.S. economy added 431,000 nonfarm jobs in March, the Labor Department recently reported. Gains were strongest in leisure and hospitality, as well as professional and business services. The unemployment rate declined to 3.6 percent in March, and the labor force participation rate held steady at 62.4 percent.
Producer Prices Rise 11.2 Percent Year-Over-Year
The Labor Department recently reported that the Producer Price Index rose 11.2 percent in March from a year before, the largest increase recorded since the index was first calculated in 2010. The index, which measures price changes on products and services before they reach consumers, showed prices were up 1.4 percent in March from the month prior, following a 0.9 percent rise in February.
The Consumer Price Index – a measurement of prices for consumer
goods – increased 8.5 percent over the past 12 months.
Beige Book: Economic Uncertainty Elevated
Economic activity continued to expand at a modest to moderate pace through February 2022, amid reported COVID-19 disruptions and severe winter weather, according to the Federal Reserve’s (Fed) Beige Book. Looking ahead to the next six months, the Fed noted that the outlook remained “stable and generally optimistic,” but that “reports highlighted an elevated degree of uncertainty.”
WHAT OTHERS ARE SAYING ABOUT THE FHLBANKS
“The funding from the (Partnership Grant Program) grant will help us with the expenses we incur providing a wide variety of services to the community. We are thankful for the positive impact these funds will make.”
— Julie Egressy, Executive Director, Mercy Housing
“Hancock Whitney is honored to partner with FHLB Dallas to help Mercy Housing. Mercy Housing offers a wide variety of services to the community, including homebuyer education, financial literacy and healthy lifestyle programs that improve people’s lives.”
— Anthony Montgomery, senior vice president and Director of Community Development, Hancock Whitney
“There were several things I needed to get done, and the Special Needs Assistance Program (SNAP) helped make it happen. Being on a fixed income, I didn’t want to worry about taking out a loan to fund these repairs.”
— Frances Johnson, FHLB Dallas SNAP Recipient
“Programs such as SNAP help community banks like us create such a lasting impact on older and disabled adults, many of whom we consider our neighbors. I appreciate the partnership we have with FHLB Dallas to make these subsidies available to our community. We also want to acknowledge the support and participation our dedicated city property inspection managers put in to facilitate this process.”
— Chris Lampkin, market president, Southeast Arkansas, Citizens Bank
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