Senator Scott Asks FHFA for "Evidence" to Support Proposed Adjustments to the Pricing Framework for Fannie/Freddie

Senate Banking, Housing, and Urban Affairs Committee Ranking Member Tim Scott (R-SC) asked the Federal Housing Finance Agency ("FHFA") to provide further evidence to back up its proposal to amend the pricing framework for Fannie Mae and Freddie Mac (a/k/a "Government Sponsored Enterprises or GSEs").

In a letter addressed to FHFA Director Sandra Thompson, Senator Scott expressed concern over the lack of evidence to support the FHFA’s recent statement that the updated pricing framework would "more accurately align pricing with the expected financial performance and risks of the underlying loans." Senator Scott asked Ms. Thompson to schedule a briefing with his office and submit, no later than May 19, 2023, information on:

• how the average guarantee fee has changed during Ms. Thompson’s tenure as Director;
• how the updated pricing framework will "further the safety and soundness of the GSEs";
• whether cross-subsidization has increased the pricing of credit risk in connection with loans delivered to the GSEs;
• whether guarantee fees are appropriately set to support "sustainable mortgage credit";
• expected losses for each of the loan categories under the GSEs’ fee matrices;
• average credit score, average loan-to-value ratio, default rate and other relevant data related to Fannie Mae’s "HomeReady Mortgage" and Freddie Mac’s "Home Possible Mortgage" that the FHFA used to support their decision to reduce the fees on these mortgages to zero; and
• supporting analysis, including expected loss information, used to support the proposed debt-to-income ratio-based fee.