Critics argue that community banks and small credit unions are vulnerable to rules designed for large lenders. Also, if Fannie and Freddie exit conservatorship, many of the guardrails protecting small lenders could vanish.
Federal Reserve Chair Jerome Powell suggested expanding the Community Reinvestment Act to include nondepository financial institutions but said Congress will have to make that decision.
The new rule gives Fannie and Freddie two years to come up with a resolution plan that includes no government support in the event of a crisis. Housing finance experts say: “Good luck with that.”
Mortgage industry groups continue to put pressure on the Treasury Department and the Federal Housing Finance Agency to revisit the restrictions on the amount of loans Fannie Mae and Freddie Mac can purchase.
The proposed rule would require the GSEs to write living wills that include no government support. However, their PSPA with Treasury includes letters of credit with an outstanding balance of $254 billion.