H.R. 9460: Sustainable Homeownership Act

This bill would change how Fannie Mae and Freddie Mac operate and how they are overseen. It would revise their capital, lending, pricing, and risk-management rules, while also setting out a path for eventually ending their current conservatorship under the federal government.

Changes to Mortgage Standards and Lending Practices

The bill would raise the standards for the mortgage assets that Fannie Mae and Freddie Mac are allowed to hold, and it would update their insurance and coverage requirements. It would also limit how much of certain assets they may own.

In addition, the bill would prohibit pricing discrimination based on the size of the seller or lender. It would require the enterprises to make equivalent mortgage offers under similar circumstances, so that comparable loans receive comparable treatment. The bill would also expand some exceptions that apply to refinancing mortgages.

Credit-Risk Transfer and Capital Rules

The bill would require Fannie Mae and Freddie Mac to carry out major credit-risk transfer activities, which are methods of shifting some mortgage risk to private investors rather than keeping all of it on their own balance sheets. It would also revise the rules that govern how much capital they must hold to absorb losses.

These changes are intended to adjust how risk is shared between the companies, private markets, and the federal government.

Oversight, Transparency, and Approval Timelines

The bill would increase transparency in the approval and oversight process for the enterprises. It would also set clearer timelines for certain approvals, likely to make the process more predictable for lenders, investors, and other market participants.

It would direct the Federal Housing Finance Agency and the Treasury Department to write rules and provide reports on how the new framework is working.

Government Backstop, Fees, and Earnings Rules

The bill would extend the Treasury backstop for Fannie Mae and Freddie Mac, meaning the federal government would continue to provide support under certain conditions. In exchange, the enterprises would pay annual fees.

The bill would set a target return on equity range of 9% to 13%. If either company falls short on capital, the bill would limit dividend payments. If earnings rise above the target range, the excess would be remitted rather than retained.

Path Toward Ending Conservatorship

The bill also outlines steps for ending conservatorship, the status under which Fannie Mae and Freddie Mac have operated since the financial crisis. The overall structure appears designed to move them toward a more normal operating model while keeping federal oversight, capital requirements, and a government backstop in place during the transition.

Relevant Companies

• FMCC - Freddie Mac. Would be directly affected by changes to capital rules, risk-transfer requirements, dividend limits, pricing rules, and the proposed conservatorship exit process.
• FNMA - Fannie Mae. Would be directly affected by the same set of operating, capital, pricing, transparency, and conservatorship-related changes.