WASHINGTON—With Treasury and the Federal Housing Finance Agency (FHFA) announcing the suspension of several parts of the 2021 Preferred Stock Purchase Agreements (PSPAs), FHFA Acting Director Sandra Thompson says her agency will be working with Treasury to make further refinements to the business adjustments.
Suspended provisions include the 7% cap on investment and second home loans, limits on Fannie Mae and Freddie Mac cash windows (loans acquired for cash consideration), multifamily lending, loans with higher risk characteristics, and investment properties.
“We did make a big announcement Tuesday,” Thompson told NAFCU President and CEO Dan Berger during a Q&A session at the trade association’s Congressional Caucus. “We're going to review what those limits should be, and we’ll be working with Treasury on further refinements to those business adjustments. We have a policy agenda to move forward with affordable housing and certainly making sure that everyone, whether they're a borrower or renter, have safe, affordable and decent housing.”
Thompson stressed that as the adjustments were being determined, clearly in her mind were the mortgage problems that brought on the Great Recession.
Lessons Learned
“When I was at the FDIC during the last big banking crisis, I saw first-hand how irresponsible lending was a lose-lose for everyone,” Thompson stated. “We want to make sure borrowers have sustainable loans and own homes they can afford.”
Thompson also addressed the risks to financial institutions from climate change, a topic that is growing in concern in Washington.
As CUToday.info reported, regulators in the Pacific Northwest—an area hit by winds, storms, wildfires and rising temperatures—want financial institutions to do more than just have disaster preparedness and recovery plans in place. They want banks and credit unions to now consider the business impact from these events.
As a result, the state of Washington’s state-chartered credit unions and banks are being urged by their regulator to begin discussions over how to integrate climate change risks into their governance, risk management, and strategic plans.
The Washington Department of Financial Institutions said that during upcoming examinations it plans to begin talking to its regulated financial institutions about whether they are contemplating climate change and if so, what steps they are taking to begin to address the “risks and opportunities climate change brings.”
Moreover, Randal Quarles, vice chairman of the Federal Reserve, this year addressed the importance of financial institutions addressing climate change.
Other Concerns
Thompson addressed some of the thoughts the Financial Stability Oversight Council has on the matter. FHFA is a member of FSOC.
“I think we started with Hurricane Sandy and just tried to figure out what are the lessons that we learned from each of the events that have taken place—not just the hurricanes but the wildfires as well—and it has been quite interesting,” Thompson said. “We are making sure that we have accurate and updated flood information, are addressing wind issues…”
Thompson said FSOC is concerned with how the disasters are not only growing in terms of the size of the areas they are impacting, but also how they are reaching locations previously not affected my major weather events.
“We had the flash floods recently in New York City, and some of those properties were not insured,” Thompson explained. “They were not on the flood map, and, before this, there would have been no reason for them to be on the flood map.”
Thompson added FSOC is advocating stress test models for financial institutions now include a climate factor.
“The one thing that bothers me is the areas hit hardest by many of these natural disasters are where many low-income people live. That concerns me the most,” she said.