Federal regulators have been busy trying to answer questions about inflation and affordability in the mortgage market and the broader economy. Learn about some recent actions and perspectives put forth by top agency officials on these topics and more in this roundup:
FHFA enhances flex modification policies to help struggling borrowers
In an effort to promote sustainable homeownership and safety and soundness for the government-sponsored enterprises (GSEs), the Federal Housing Finance Agency (FHFA) announced enhancements to “flex modification” policies at Fannie Mae and Freddie Mac to make meaningful mortgage payment reductions accessible to more borrowers facing long-term hardships. The enhanced policies lower a borrower’s monthly payment by incrementally applying the steps below to achieve a 20 percent principal and interest (P&I) payment reduction:
- Reducing the borrower’s interest rate (if eligible);
- Extending the mortgage term; and
- Forbearing principal for borrowers with mark-to-market loan-to-value ratios greater than 50 percent.
FHFA Director Sandra Thompson noted the GSEs have completed more than half a million modifications since the policies were implemented in 2017. Learn more here.
NCUA charters second credit union through pilot program
The National Credit Union Administration (NCUA) granted a federal charter to Fair Break Federal Credit Union. The charter comes with share insurance fund coverage for the Memphis, Tenn.-based institution. Fair Break Federal Credit Union is the second credit union to receive a charter under the NCUA’s provisional charter pilot initiative, which allows a credit union’s organizers to obtain a federal credit union charter and affords them 12 months to obtain the capital necessary to begin operations. Charters issued under the initiative do not authorize institutions to accept member deposits or originate loans until they obtain a targeted level of donated capital. Read more about this development here.
Fed Gov. Bowman recalls how past lessons can inform future policy
Federal Reserve Gov. Michell Bowman delivered a speech titled “The Federal Reserve's Balance Sheet as a Monetary Policy Tool: Past Lessons and Future Considerations” at the Institute for Monetary and Economic Studies, Bank of Japan. Bowman explained how, following the 2008 financial crisis, the Fed used forward guidance and large-scale asset purchases (LSAPs), or quantitative easing (QE), to support the economy when short-term rates were near zero. Forward guidance aimed to lower long-term rates by signaling sustained low short-term rates. LSAPs reduced yields on long-term securities, supporting asset prices and economic recovery, she said. QE was particularly effective for stressed assets like mortgage-backed securities (MBS), bolstering financial stability and lending. The Fed ended QE by 2014 and later adopted an “ample reserves” approach, maintaining a larger balance sheet to provide market liquidity and minimize short-term rate volatility. Read Bowman’s full speech here.
SEC to close Salt Lake City office
The Securities and Exchange Commission (SEC) plans to close its Salt Lake Regional Office (SLRO) later this year, reducing its regional footprint from 11 regional offices to 10. The SLRO has long been the agency’s smallest regional office and has recently experienced significant attrition, according to an SEC press release. The agency considered its budget and organizational efficiency in deciding to close the office, and it has no plans to close any other regional offices. All current staff will be aligned to existing SEC organizational components based on their current functions and agency mission needs. The office’s enforcement jurisdiction over the state of Utah will be shifted to the SEC’s Denver Regional Office. Regional examinations authority will not be affected by the closure because the SEC’s National Exam Program shifted SLRO’s local jurisdiction to Denver many years ago.