FHFA Director Melvin Watt appeared before the Senate Committee on Banking, Housing, and Urban Affairs on May 23 to provide testimony on the “Ten Years of Conservatorship: The Status of the Housing Finance System.” Watt offered both prepared testimony as well as the Agency’s 2017 FHFA Annual Report to Congress. Overall, the hearing was cordial and congratulatory to the Director as it was likely his last appearance before his term expires at the end of the year. During the course of the hearing lawmakers expressed concern regarding housing affordability and Director Watt was asked to continue to focus on this area.
Watt did announce a new proposal for a risk-based capital approach for the Enterprises that will soon released for comment:
"We are planning in the very near future to propose a risk-based capital and minimum leverage capital rule that would replace the [Office of Federal Housing Enterprise Oversight] capital standards that were in place prior to conservatorship and that are now suspended while the enterprises are in conservatorship.”
"While the new capital rule would also be suspended while the enterprises remain in conservatorship, we believe it is important for our agency, as a regulator, to articulate a view on prudential capital requirements for the enterprises based on their current operations."
While the path forward on housing finance reform remains unclear, the proposed capital regime could lay the ground work for future efforts. NMHC/NAA will monitor the release of the proposed regime and provide input to FHFA.