Who or what are the FHFA and why do they matter?
The Federal Housing Finance Agency was formed in 2008. In technical terms it was tasked with overseeing the Federal Housing Finance Board (FHFB) and the Office of Federal Housing Enterprise Oversight (OFHEO). Both of those organizations are now dissolved and in a nut shell, the FHFA oversees Fannie Mae and Freddie Mac. Their objective was to strengthen the United States housing system after the financial collapse.
With me so far?
The FHFA isn’t funded by Congress but is funded by the entities that it regulates. This leads us to this weeks ruling. On July 16th, 2018 the US Court of Appeals for the Fifth Circuit declared the Federal Housing Finance Agency unconstitutional. The ruling stems from a lawsuit brought by Fannie and Freddie shareholders. In its ruling the panel stated, “We hold that Congress insulated the FHFA to the point where the Executive Branch cannot control the FHFA or hold it accountable,”. Essentially, the organization is governed by one person who can only be removed with cause and thereby may not always function within the shareholders best interests.
What does this mean for home lending?
Well, no one is 100% certain. As many who are in and around the mortgage industry know, a lot has changed for us over the past ten years. There are new regulations and additional steps that are now required to process home loans. These have been implemented by the FHFA and the Consumer Financing Protection Bureau (CFPB). And there are other lawsuits related to the FHFA as well as the CFPB that are currently pending. The outcomes of these could alter how much influence both of these organizations carry and the regulations they have put in place in the last few years.
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