FHFA Rescinds Key Guidelines Impacting Multifamily Properties and Climate Risk Management
In a significant policy shift, the Federal Housing Finance Agency (FHFA) has announced a series of changes affecting government-sponsored enterprises (GSEs) and their regulatory frameworks. These updates, directed by FHFA Director Bill Pulte, reflect the agency’s evolving priorities and operational focus.
Changes to Radon Policies
In November 2022, the FHFA mandated that GSEs implement new radon policy requirements for multifamily properties. However, Pulte’s recent statement emphasizes that these requirements add unnecessary complexity and costs to enterprise transactions. As a result, he has decided that the radon policies are no longer aligned with FHFA’s goals as conservator.
Climate Risk Management Bulletin Rescinded
Additionally, a bulletin issued to Federal Home Loan Banks (FHLBanks) in 2024, which provided guidance on managing climate-related risks, has been rescinded by Pulte. He characterized climate-related risk as a pervasive issue that is integrated into existing risk management frameworks, asserting that further frameworks lead to avoidable costs.
Minimum Standards for Rental Payment Flexibility Removed
The FHFA has also nullified the requirement for Fannie Mae and Freddie Mac to enforce specific minimum standards related to rental payment flexibility and lease notice procedures at multifamily housing units. This decision is part of a broader reevaluation of the agency’s regulatory approach.
Termination of Special Purpose Credit Programs
Earlier this week, the FHFA announced the discontinuation of the Underserved Areas Program (UDAP) guidance and the Special Purpose Credit Programs (SPCPs) previously utilized by Fannie and Freddie. While these programs accounted for a relatively small volume—approximately 15,000 SPCP-driven mortgages purchased in 2023—they were well-received by lenders aiming to enhance lending in traditionally underserved areas.
Workforce Reduction and Department Closures
In line with these changes, the FHFA has also announced a 10% reduction in its workforce, prompting the closure of two departments: the Research and Statistics Division and the Division of Public Interest Examination (DPIE). This restructuring underscores the agency’s commitment to streamline operations and focus on core objectives.
Conclusion
The recent decisions made by the FHFA signify a notable shift in regulatory priorities and operational efficiency aimed at reducing complexity and costs within the GSE framework. Stakeholders in the housing finance sector will need to adapt to these changes as the agency realigns its focus moving forward.
