[Federal Register Volume 84, Number 62 (Monday, April 1, 2019)]
[Presidential Documents]
[Pages 12479-12482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06441]



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Vol. 84

Monday,

No. 62

April 1, 2019

Part V





The President





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Memorandum of March 27, 2019--Federal Housing Finance Reform
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  Federal Register / Vol. 84 , No. 62 / Monday, April 1, 2019 / 
Presidential Documents  

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 Title 3--
 The President

[[Page 12479]]

                Memorandum of March 27, 2019

                
Federal Housing Finance Reform

                Memorandum for the Secretary of the Treasury[,] the 
                Secretary of Agriculture[,] the Secretary of Housing 
                and Urban Development[,] the Secretary of Veterans 
                Affairs[,] the Director of the Office of Management and 
                Budget[,] the Director of the Bureau of Consumer 
                Financial Protection[,] the Director of the Federal 
                Housing Finance Agency[,] the Assistant to the 
                President for Economic Policy[, and] the Assistant to 
                the President for Domestic Policy

                The housing finance system of the United States is in 
                urgent need of reform. During the financial crisis of 
                2008, the Federal National Mortgage Association (Fannie 
                Mae) and the Federal Home Loan Mortgage Corporation 
                (Freddie Mac)--collectively known as the Government-
                sponsored enterprises (GSEs)--suffered significant 
                losses due to their structural flaws and lack of 
                sufficient regulatory oversight. To prevent their 
                failure, the GSEs received support from the Federal 
                Government and were placed into conservatorship in 
                September 2008. The Housing and Economic Recovery Act 
                of 2008 enacted important reforms to the supervision, 
                oversight, risk management, and governance of the GSEs. 
                The GSEs remain in conservatorship, however, and the 
                housing finance system continues to face significant 
                and fundamental challenges. To date, the GSEs are the 
                dominant participants in the housing finance system and 
                lack real competitors. The lack of comprehensive 
                housing finance reform since the financial crisis of 
                2008 has left taxpayers potentially exposed to future 
                bailouts, and has left the Federal housing finance 
                programs at the Department of Housing and Urban 
                Development potentially overexposed to risk and with 
                outdated operations. Accordingly, it is time for the 
                United States to reform its housing finance system to 
                reduce taxpayer risks, expand the private sector's 
                role, modernize government housing programs, and make 
                sustainable home ownership for American families our 
                benchmark of success. In order to resolve these ongoing 
                challenges and by the authority vested in me as 
                President by the Constitution and the laws of the 
                United States of America, I hereby direct the 
                following:

                Section 1. Framework to Reform the GSEs. (a) The 
                Secretary of the Treasury is hereby directed to develop 
                a plan for administrative and legislative reforms 
                (Treasury Housing Reform Plan) to achieve the following 
                housing reform goals:

(i) Ending the conservatorships of the GSEs upon the completion of 
specified reforms;

(ii) Facilitating competition in the housing finance market;

(iii) Establishing regulation of the GSEs that safeguards their safety and 
soundness and minimizes the risks they pose to the financial stability of 
the United States; and

(iv) Providing that the Federal Government is properly compensated for any 
explicit or implicit support it provides to the GSEs or the secondary 
housing finance market.

                    (b) The Treasury Housing Reform Plan shall include 
                reform proposals to achieve the following specific 
                objectives:

(i) Preserving access for qualified homebuyers to 30-year fixed-rate 
mortgages and other mortgage options that best serve the financial needs of 
potential homebuyers;

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(ii) Maintaining equal access to the Federal housing finance system for 
lenders of all sizes, charter types, and geographic locations, including 
the maintenance of a cash window for loan sales;

(iii) Establishing appropriate capital and liquidity requirements for the 
GSEs;

(iv) Increasing competition and participation of the private sector in the 
mortgage market, including by authorizing the Federal Housing Finance 
Agency (FHFA) to approve guarantors of conventional mortgage loans in the 
secondary market;

(v) Mitigating the risks undertaken by the GSEs, including by altering, if 
necessary, their respective policies on loan limits, program and product 
offerings, credit underwriting parameters, and the use of private capital 
to transfer credit risk;

(vi) Recommending appropriate size and risk profiles for the GSEs' retained 
mortgage and investment portfolios;

(vii) Defining the role of the GSEs in multifamily mortgage finance;

(viii) Defining the mission of the Federal Home Loan Bank system and its 
role in supporting Federal housing finance;

(ix) Evaluating, in consultation with the Secretary of Housing and Urban 
Development and the Director of the Bureau of Consumer Financial 
Protection, the ``QM Patch,'' whereby the GSEs are exempt from certain 
requirements of the Qualified Mortgage (QM) determination;

(x) Defining the GSEs' role in promoting affordable housing without 
duplicating support provided by the Federal Housing Administration (FHA) or 
other Federal programs; and

(xi) Setting the conditions necessary for the termination of the 
conservatorships of the GSEs, which shall include the following conditions 
being satisfied:

  (A) The Federal Government is fully compensated for the explicit and 
implicit guarantees provided by it to the GSEs or any successor entities in 
the form of an ongoing payment to the United States;

  (B) The GSEs' activities are restricted to their core statutory mission 
and the size of investment and retained mortgage portfolios are 
appropriately limited; and

  (C) The GSEs are subjected to heightened prudential requirements and 
safety and soundness standards, including increased capital requirements, 
designed to prevent a future taxpayer bailout and minimize risks to 
financial stability.

                    (c) For each reform included in the Treasury 
                Housing Reform Plan, the Secretary of the Treasury must 
                specify whether the proposed reform is a 
                ``legislative'' reform that would require congressional 
                action or an ``administrative'' reform that could be 
                implemented without congressional action. For each 
                ``administrative'' reform, the Treasury Housing Reform 
                Plan shall include a timeline for implementation.
                    (d) In developing the Treasury Housing Reform Plan, 
                the Secretary of the Treasury shall consult with the 
                Secretary of Agriculture, the Secretary of Housing and 
                Urban Development, the Secretary of Veterans Affairs, 
                the Director of the Office of Management and Budget, 
                the Director of the Bureau of Consumer Financial 
                Protection, the Director of the FHFA, the Assistant to 
                the President for Economic Policy, and the FHFA's 
                Federal Housing Finance Oversight Board.
                    (e) The Treasury Housing Reform Plan shall be 
                submitted to the President for approval, through the 
                Assistant to the President for Economic Policy, as soon 
                as practicable.

                Sec. 2. Framework to Reform the Programs of the 
                Department of Housing and Urban Development, the FHA, 
                and the Government National Mortgage

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                Association (GNMA). (a) The Secretary of Housing and 
                Urban Development is hereby directed to develop a plan 
                for administrative and legislative reforms (HUD Reform 
                Plan) to achieve the following housing reform goals:

(i) Attempting to ensure that the FHA and GNMA assume primary 
responsibility for providing housing finance support to low- and moderate-
income families that cannot be fulfilled through traditional underwriting;

(ii) Reducing taxpayer exposure through improved risk management and 
program and product design; and

(iii) Modernizing the operations and technology of the FHA and GNMA.

                    (b) The HUD Reform Plan shall include reform 
                proposals to achieve the following specific objectives:

(i) Addressing the financial viability of the Home Equity Conversion 
Mortgage program;

(ii) Assessing the risks and benefits associated with providing assistance 
to first-time homebuyers, including down-payment assistance;

(iii) Defining the appropriate role of the FHA in multifamily mortgage 
finance;

(iv) Diversifying FHA lenders through increased participation by registered 
depository institutions;

(v) Enhancing GNMA program participation requirements and standards to 
ensure its safety and soundness and to protect borrower and investor 
interests; and

(vi) Reducing abusive and unsound loan origination or servicing practices 
for loans in the GNMA program, including, if appropriate, by providing for 
cooperation with other loan program sponsors and regulators.

                    (c) For each reform included in the HUD Reform 
                Plan, the Secretary of Housing and Urban Development 
                shall specify whether the proposed reform is a 
                ``legislative'' reform that would require congressional 
                action or an ``administrative'' reform that could be 
                implemented without congressional action. For each 
                ``administrative'' reform, the HUD Reform Plan shall 
                include a timeline for implementation.
                    (d) In developing the HUD Reform Plan, the 
                Secretary of Housing and Urban Development shall 
                consult with the Secretary of the Treasury, the 
                Secretary of Agriculture, the Secretary of Veterans 
                Affairs, the Director of the Office of Management and 
                Budget, the Director of the Bureau of Consumer 
                Financial Protection, the Assistant to the President 
                for Economic Policy, and the Assistant to the President 
                for Domestic Policy.
                    (e) The HUD Reform Plan shall be submitted to the 
                President for approval, through the Assistant to the 
                President for Economic Policy, as soon as practicable.

                Sec. 3. General Provisions. (a) Nothing in this 
                memorandum shall be construed to impair or otherwise 
                affect:

(i) the authority granted by law to an executive department or agency, or 
the head thereof; or

(ii) the functions of the Director of the Office of Management and Budget 
relating to budgetary, administrative, or legislative proposals.

                    (b) This memorandum shall be implemented consistent 
                with applicable law and subject to the availability of 
                appropriations.

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                    (c) This memorandum is not intended to, and does 
                not, create any right or benefit, substantive or 
                procedural, enforceable at law or in equity by any 
                party against the United States, its departments, 
                agencies, or entities, its officers, employees, or 
                agents, or any other person.
                    (d) The Secretary of the Treasury is authorized and 
                directed to publish this memorandum in the Federal 
                Register.
                
                
                    (Presidential Sig.)

                THE WHITE HOUSE,

                    Washington, March 27, 2019

[FR Doc. 2019-06441
Filed 3-29-19; 11:15 am]
Billing code 4811-33-P