How Former FHFA Director Mark Calabria Impacted the Mortgage Industry

The news is in: Federal Housing Finance Agency (FHFA) Director Mark Calabria is out. The Trump-appointed official was let go just hours after the Supreme Court ruled that the leadership structure of the FHFA is unconstitutional.

The high court ruling decided that a 2008 law that established the FHFA was not constitutional. This law stated that the president could only fire the director for cause. The ruling made President Biden’s decision to remove Calabria unsurprising.

“FHFA has an important mission of oversight of Fannie Mae and Freddie Mac as well as the Federal Home Loan Bank System,” said a White House official to HousingWire. “It is critical that the agency implement the Administration’s housing policies. As a result, in light of the Supreme Court’s decision today, the President is moving forward today to replace the current Director with an appointee who reflects the Administration’s values.”

It’s not currently clear who will serve as replacement to Calabria. For the time being, Biden has appointed Sandra Thompson, the FHFA Deputy Director of the Division of Housing Mission and Goals, as acting director while the administration finds a permanent solution. The list of possible replacements includes economist Mark Zandi, Chief Economist of Moody’s Analytics, and Julia Gordon, former FHFA official and President of the National Community Stabilization Trust.

How Calabria impacted the industry

Calabria’s experience ranges from Director of Financial Regulation Studies at the Cato Institute to serving as Chief Economist to former Vice President Mike Pence. Notably, he contributed significantly to the Housing and Economic Recovery Act of 2008 (HERA), which created a new regulatory framework for Fannie Mae and Freddie Mac and the Federal Home Loan Banks. Trump nominated Calabria to lead the FHFA in December of 2018.

Across numerous media appearances, Calabria has reiterated a pro-free market stance. Specifically, Calabria believes that the GSEs hold too large of a market share and that their footprint should be dramatically reduced. Because he asserts that the GSEs’ large presence is due to undercapitalization, Calabria has moved to increase their capital.

Overall, he favors a “originate to hold” system. In other words, he believes that only big banks should originate mortgages, giving depositories control over the process.

Fees & market caps

As a part of overall industry changes, Calabria has instituted new fees and imposed market caps that have caused significant disruption. This forced some lenders to find alternate homes for their loans, driving up the overall expense of those loans.

Pay cuts at Fannie & Freddie

Calabria also exerted changes that have affected professionals within the GSEs. From proposing pay cuts for executives to deferring compensation and slashing bonuses, his influence has led to turnover in leadership.

Lending accessibility & credit access

Critics believe Calabria has harmed the GSEs and the mortgage industry in general. They say Calabria’s actions have created an environment where lending is more expensive and less available to the average America. Plus, they contend that he has created a less stable housing finance system with inadequate access to credit.

In reaction to ousting Calabria from his position, Senate Banking Committee Chairman Sherrod Brown (D-Ohio) said, “Today’s decision gives President Biden the opportunity to make sure that we have an FHFA director who is committed to addressing the housing needs of renters and homeowners, and to making our housing system work for everyone.”

For lenders, now is a time of uncertainty when it comes to mortgage finance. In the coming months, mortgage professionals can expect shakeup within the GSEs. Whoever Biden decides to nominate to the FHFA, they will likely look to expand the roles of Fannie and Freddie within the industry. Whether that translates successfully to expanded access to homeownership and more widely available credit remains to be seen.

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