"FHFA should improve the administration rather than drastically expanding the SCP"
The Federal Housing Finance Agency should not expand the suspended counterparty program (SCP), said the Mortgage Bankers Association.
The FHFA proposed a new rule in July to amend the existing SCP, which would allow the agency immediately suspend business between its regulated entities (Fannie Mae, Freddie Mac, and the FHLBanks) and counterparties who are found to have committed and are convicted of criminal offenses.
In a joint letter with the American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA), MBA strongly opposed the expansions to the program as the FHFA has provided little – if any – evidentiary support as to why the SCP should be expanded. The associations also believe the program changes will likely result in severe and disproportionate consequences.
“The proposed rule completely fails to demonstrate why drastically expanding the SCP is necessary and why the administration of the existing program is not meeting the relevant policy objectives,” the associations wrote. “It provides no rationale for the need for the expansion, nor does it offer any data suggesting that the GSEs have been in any way materially harmed by FHFA’s inability to suspend counterparties for civil or administrative sanctions.”
MBA added that the proposed rule completely disregards the impact of being suspended from FHFA-regulated funding sources on the mortgage business’s ability to operate.
“Given the extreme economic and reputational harm that counterparties could face, FHFA should not impose such disproportionate and draconian sanctions on the basis of findings of misconduct in the context of civil enforcement actions,” MBA said.
Instead of issuing immediate suspension orders under a reduced standard, the associations said the FHFA should work to improve the administration of the current SCP.
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