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FHFA, Treasury suspend controversial January PSPA provisions

The Federal Housing Finance Agency (FHFA) and the U.S. Department of the Treasury have backtracked on recent new provisions added to the Preferred Stock Purchase Agreements (PSPAs) with Fannie Mae and Freddie Mac.

Those provisions, added in January just before the President Donald Trump’s administration left office, included limits on the government-sponsored enterprises’ (GSEs) acquisitions of mortgages for second homes and investment properties. In addition to prompting the enterprises to constrain their procurement of such loans to 7% of each company’s total single-family spend, the requirements also applied harsher underwriting standards to those loans.

Other suspended provisions include limits on the enterprises’ cash windows and volume caps on loans with “higher risk characteristics.”

The rules, understandably, were met with industry-wide pushback from lenders, especially with recent demand for second homes and investment properties up substantially. Others have brought up objections to the restrictions on so-called “higher risk” loans; in August, for example, Scott Olson, executive director of the Community Home Lenders Association (CHLA), asserted that the caps “impede the very objectives that the housing goals are designed to promote.”

With the controversial provisions now suspended, it appears that the FHFA has, for the moment, taken notice.

“This suspension will provide FHFA time to review the extent to which these requirements are redundant or inconsistent with existing FHFA standards, policies, and directives that mandate sustainable lending standards,” said Sandra L. Thompson, acting director of the agency.

“FHFA will consult with Treasury on the scope of the review and on any recommended revisions to the PSPA requirements.”

The suspensions were met with praise in the mortgage industry, including a hearty commendation from Olson and the CHLA.

“CHLA commends in the strongest possible way FHFA Director Sandra Thompson for suspending the January PSPA restrictions on higher risk loans, investors and second homes, and small lender cash window access,” the CHLA said in a statement.

“This action is critical to enable Fannie Mae and Freddie Mac to fully carry out their mortgage access to credit role.”

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