SIFMA Submits Recommendations to FHFA on Guarantee Fees

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Release Date: August 8, 2014
Contact: Carol Danko, 202.962.7390,                      

SIFMA Submits Recommendations to FHFA on Guarantee Fees

Washington, DC, August 8, 2014- SIFMA today submitted a comment letter to the Federal Housing Finance Agency (FHFA) in response to the agency's request for comment on Fannie Mae and Freddie Mac guarantee fees (g-fees):

 "We commend FHFA for seeking input from the industry on g-fees, and believe this is a thoughtful and measured approach to this important issue," said said Randy Snook, SIFMA executive vice president, business policies and practices. "We encourage the FHFA to consider the broader context in which g-fees will be raised, and strike a balance that protects taxpayers from credit risk and ensures the availability of credit to mortgage borrowers without unduly raising costs.  Additionally, FHFA should consider the impact of any changes on liquidity in the market and incentives that might be created related to the choice of other funding channels such as private-label MBS or FHA.  Policymakers should consider g-fees in conjunction with other policy levers available and the broader market context when attempting to encourage more private label mortgage-backed securities issuance."

The letter outlines SIFMA's following key points and recommendations:

· Considerations and Goals: FHFA should consider a broad range of factors when setting g-fees. The goals in setting the fees should be 1) protecting the GSEs and taxpayers from credit risk; 2) not disrupting liquidity in the markets for GSE MBS; 3) creating a more level playing field for private-label securitization (PLS); and 4) not unduly impairing the availability or cost of credit to mortgage borrowers.

· Capital Requirements: The capital regime imposed on the GSEs should be sufficient to protect taxpayers from losses and preserve the ability of GSEs to operate in times of stress.  SIFMA believes that FHFA should target a range of capital requirements instead of a specific level of capital, and that an appropriate capital range may fall between 4-8%. Return on Capital (ROC) assumptions should similarly be flexible and vary within a range reflecting a full economic cycle. ROC assumptions should be directly linked to the risk guaranteed by the GSEs, whereby riskier underwriting would imply higher ROC requirements and vice versa.  FHFA should base stress testing on the Federal Reserve Board's Comprehensive Capital Analysis and Review (CCAR) in order to better align the GSEs to bank-like standards and practices.  Maintaining capital above the regulatory minimum level would signal to the markets the robustness and soundness of the GSEs. Buffers could be built in over time as a component of, or in addition to, the g-fee.

· Impact on PLS Markets: FHFA should consider the level of g-fees in conjunction with other policy levers and broader issues in the PLS markets when considering what the broader impacts of g-fee changes may be. As securitization through the GSEs becomes more expensive, PLS is just one alternative; funding from bank portfolios and FHA programs also will be relevant comparisons for lenders. A number of factors contribute to increases in PLS activity not being assured from g-fee increases, such as: uncertainty surrounding the future of the mortgage market, incomplete regulatory rules, and differences in views among investors, issuers and other market participants on the framework for PLS issuance that must be resolved.  SIFMA further discusses these issues in its comment letter to the Treasury Department, also submitted today.

The full text of the letter to FHFA can be found here.


The Securities Industry and Financial Markets Association (SIFMA) brings together the shared interests of hundreds of securities firms, banks and asset managers. SIFMA's mission is to support a strong financial industry, investor opportunity, capital formation, job creation and economic growth, while building trust and confidence in the financial markets. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit

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