[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]



                    HOUSING IN AMERICA: OVERSIGHT OF
                   THE FEDERAL HOUSING FINANCE AGENCY

=======================================================================

                             HYBRID HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 20, 2022

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 117-96
                           
                           
                           
                           
		[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


				________


	              U.S. GOVERNMENT PUBLISHING OFFICE

48-472 			    WASHINGTON : 2022                           
                           
                         
                                       
                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            ANN WAGNER, Missouri
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            ROGER WILLIAMS, Texas
BILL FOSTER, Illinois                FRENCH HILL, Arkansas
JOYCE BEATTY, Ohio                   TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
CINDY AXNE, Iowa                     TREY HOLLINGSWORTH, Indiana
SEAN CASTEN, Illinois                ANTHONY GONZALEZ, Ohio
AYANNA PRESSLEY, Massachusetts       JOHN ROSE, Tennessee
RITCHIE TORRES, New York             BRYAN STEIL, Wisconsin
STEPHEN F. LYNCH, Massachusetts      LANCE GOODEN, Texas
ALMA ADAMS, North Carolina           WILLIAM TIMMONS, South Carolina
RASHIDA TLAIB, Michigan              VAN TAYLOR, Texas
MADELEINE DEAN, Pennsylvania         PETE SESSIONS, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   RALPH NORMAN, South Carolina
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director
                            
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    July 20, 2022................................................     1
Appendix:
    July 20, 2022................................................    53

                               WITNESSES
                        Wednesday, July 20, 2022

Thompson, Hon. Sandra L., Director, Federal Housing Finance 
  Agency (FHFA)..................................................     5

                                APPENDIX

Prepared statements:
    Thompson, Hon. Sandra L......................................    54

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written statement of the Credit Union National Association 
      (CUNA).....................................................    64
    Written statement of the National Association of Federally-
      Insured Credit Unions (NAFCU)..............................    66
    Written statement of the National Multifamily Housing Council 
      and the National Apartment Association.....................    71
Hill, Hon. French:
    Letter to Hon. Sandra L. Thompson from Senator Tillis et al., 
      dated July 19, 2022........................................    74
Sessions, Hon. Pete:
    Letter with attachments to Hon. Marcia L. Fudge, Secretary, 
      U.S. Department of Housing and Urban Development, dated May 
      19, 2022...................................................    77
Thompson, Hon. Sandra L.:
    Written responses to questions for the record from 
      Representative Cleaver.....................................    87
    Written responses to questions for the record from 
      Representative Gooden......................................    92
    Written responses to questions for the record from 
      Representative Huizenga....................................    93
    Written responses to questions for the record from 
      Representative Posey.......................................    94
    Written responses to questions for the record from 
      Representative Sessions....................................    95
    Written responses to questions for the record from 
      Representative Sherman.....................................    96
    Written responses to questions for the record from 
      Representative Steil.......................................    98

 
                     HOUSING IN AMERICA: OVERSIGHT
                         OF THE FEDERAL HOUSING
                             FINANCE AGENCY

                              ----------                              


                        Wednesday, July 20, 2022

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:05 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Sherman, Meeks, 
Scott, Green, Cleaver, Himes, Foster, Beatty, Vargas, 
Gottheimer, Lawson, Axne, Casten, Pressley, Lynch, Adams, 
Garcia of Texas; McHenry, Lucas, Posey, Luetkemeyer, Huizenga, 
Wagner, Barr, Williams of Texas, Hill, Emmer, Zeldin, 
Loudermilk, Mooney, Davidson, Hollingsworth, Gonzalez of Ohio, 
Rose, Steil, Gooden, Timmons, Sessions, and Norman.
    Chairwoman Waters. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Today's hearing is entitled, ``Housing in America: 
Oversight of the Federal Housing Finance Agency.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    First, I would like to extend my congratulations to 
Director Sandra Thompson, who has dedicated her career to 
promoting access to mortgage credit nationwide and protecting 
the safety and soundness of the housing finance system. Her 
confirmation marks the first time in our nation's history that 
a Black woman leads the Federal Housing Finance Agency (FHFA). 
Director Thompson, we are very pleased to have you here.
    Today, we continue the committee's oversight of FHFA. As we 
all know, FHFA is responsible for the supervision, regulation, 
and oversight of the Government-Sponsored Enterprises (GSEs), 
which include Fannie Mae and Freddie Mac, as well as the 
Federal Home Loan Bank System. I know my Republican colleagues 
have recently complained about a lack of oversight hearings 
pertaining to housing finance. However, this comes as a 
surprise, given their repeated complaint that this committee 
has held too many hearings on housing, over 30 to be exact.
    Let's get the facts straight. It was their former Director 
Calabria, who, in December 2020, refused to appear before this 
committee, despite our repeated requests. And it is Republicans 
in the Senate who have actively impeded our ability to confirm 
Federal agency leadership, including FHFA Director Thompson and 
FHA Commissioner Julia Gordon. So after 4 years of terrible 
stewardship by former Director Mark Calabria during the Trump 
Administration, I am relieved that FHFA is finally back to 
fulfilling its intended mission.
    Under Mr. Calabria, FHFA made several irresponsible and 
dangerous moves that harmed borrowers in the housing finance 
market, including attempts to sidestep Congress and release the 
Enterprises from Federal conservatorship. In sharp contrast, 
Director Thompson's actions have been reasonable, fair, and 
grounded in facts and the law. In just a year, Director 
Thompson has taken critical steps to set FHFA on a new path 
forward by eliminating Mr. Calabria's unnecessary and harmful 
policies which made it more expensive for families to buy or 
refinance their homes, strengthening renter protections, and 
expanding access to credit through the use of additional credit 
data, like on-time rental payments.
    Director Thompson has worked to fulfill her regulatory 
mission over the Enterprises by recommitting to comprehensive, 
fair housing and fair lending practices of the Enterprises. For 
example, Director Thompson most recently led the historic 
effort to require the Enterprises to develop and implement 
equitable housing finance plans to address the gross racial 
inequities on their books of business, and to ensure they 
prioritize innovative, equitable practices that benefit 
everyone. And we expect full transparency in these efforts, 
including public-facing metrics that show a concrete, 
measurable reduction in racial inequity.
    FHFA plays an instrumental role in our housing finance 
market, especially as our nation continues to face a housing 
crisis that has been made worse by Republicans' refusal to 
support meaningful investments to increase the housing supply, 
reduce the housing costs, and offset inflation. I look forward 
to continuing our work with Director Thompson to put borrowers 
and communities first.
    And now, I recognize the ranking member of the committee, 
the gentleman from North Carolina, Mr. McHenry, for 4 minutes.
    Mr. McHenry. Thank you, Madam Chairwoman, and Director 
Thompson, welcome to your first appearance before the committee 
as Director, and we are grateful you are here. We want to 
congratulate you on your confirmation, and we hope that this is 
the first of many appearances in an oversight fashion for the 
committee. I am sure you look forward to that, but in a 
different way than we look forward to it.
    But this hearing is important for many reasons. First and 
foremost is the Federal Housing Finance Agency's regulation of 
the Government-Sponsored Enterprises (GSEs) such as Fannie Mae 
and Freddie Mac, as well as the 11 Federal Home Loan Banks. 
Combined, these entities hold more than $7.5 trillion in 
mortgage assets, with GSEs financing roughly half of all new 
mortgages originated in the U.S. each year. This makes them 
arguably the most important component of our housing finance 
system, despite the fact that they were put in conservatorship 
and nationalized under Bush 43.
    The second reason this hearing is important is that it 
marks this committee's return to actually doing its oversight 
job. There will be more to come of the oversight agenda, but it 
has been nearly 2 years since the Chair has held a hearing with 
FHFA. That was when former Director Mark Calabria came to 
discuss his successful COVID response which helped protect 
homeowners and taxpayers from the total economic meltdown that 
was at the beginning of COVID. This earned Director Calabria 
much praise, followed by an unceremonious and unjustified 
firing by the Biden Administration in June 2021. After that, 
Ms. Thompson served as Acting Director for nearly a year. And 
it has taken another 2 months since her confirmation for her to 
be here before the committee, being invited before the 
committee, and there is no telling how long that streak would 
have continued.
    Last month, Housing Subcommittee Ranking Member French Hill 
and I sent a letter to the Chair requesting that she invite 
Director Thompson to testify at the June housing hearing. Let's 
hope this doesn't turn out to be another case of too little, 
too late, like the Administration's response on inflation, gas 
prices, supply chain failures, or the rest of the economy.
    Such blatant mismanagement has done real and lasting harm 
to American households. Congress' neglect of the FHFA and some 
of its recent decisions threaten to do even more harm. As the 
Chair noted at last month's hearing, ``Rising home prices are 
directly contributing to inflation.'' Mortgage rates have 
nearly doubled over the last year to levels unseen since 2008. 
Meanwhile, instead of working to maintain stability, FHFA has 
weakened our housing finance system by reducing taxpayer 
protections and pushing risky new schemes. For example, the 
Agency rescinded the capital and liquidity rule designed to 
ensure that the GSEs could weather an economic downturn. We are 
concerned about that.
    FHFA has also refused to complete work on the 2020 proposed 
rule on prior approval of new GSE products and pilot programs. 
That is of concern as well. And most importantly, FHFA 
compelled the GSEs to issue disastrous and controversial 
equitable housing finance plans which violate the spirit of 
that proposed rule. This is FHFA's focus as soaring housing 
costs and mortgage rates price hardworking families out of the 
market. American homeowners and prospective homebuyers deserve 
a fair system in which they can reasonably pursue the American 
Dream, and I think that is our shared goal here.
    Inflation and instability do not support that objective, 
though, and I hope that we can use this hearing to get some 
answers from the new Director on her plans to make 
homeownership an attainable goal for all Americans. Thank you, 
Madam Chairwoman.
    Chairwoman Waters. Thank you, Ranking Member McHenry.
    I now recognize the Chair of our Subcommittee on Housing, 
Community Development, and Insurance, the gentleman from 
Missouri, Mr. Cleaver, for 1 minute.
    Mr. Cleaver. Thank you, Madam Chairwoman. FHFA's mission, 
through supervision of regulated entities, is to foster a 
sustainable housing finance system that supports equitable 
access to both affordable homeownership and rental housing, 
reaching communities of color, rural areas, and other 
underserved populations, which is a description of my 
congressional district. Frighteningly, all across the United 
States, there is a widespread lack of affordable housing and 
access to credit, problems that are especially concentrated in 
communities of color, and low- and moderate-income Americans 
are increasingly cut off from housing opportunities. FHFA plays 
a vital role in both promoting equitable access to mortgage 
credit nationwide and in protecting the safety and soundness of 
the housing finance system.
    I am very pleased to welcome Director Thompson, who is 
widely respected for her deep expertise and leadership in 
housing finance. Under Director Thompson's leadership, FHFA has 
already taken significant steps to promote access and protect 
the financial standing of the housing finance system, and I 
look forward to continued dialogue on advancing the FHFA's 
mission. Thank you, Madam Chairwoman.
    Chairwoman Waters. Thank you, Mr. Cleaver. I now recognize 
the ranking member of the Subcommittee on Housing, Community 
Development, and Insurance, the gentleman from Arkansas, Mr. 
Hill, for 1 minute.
    Mr. Hill. Chairwoman Waters, thank you for agreeing with 
Ranking Member McHenry to invite Director Thompson to our 
committee today. I would urge the committee and the staff to 
recognize this responsibility as an annual responsibility under 
the statute to have the Director testify.
    Director Thompson, it's terrific to have you here. 
Congratulations on your confirmation.
    In just 10 days, the Federal Housing Finance Agency will 
turn 14-years-old. In its dual role, both as a regulator of the 
GSEs and the conservator of Fannie Mae and Freddie Mac, FHFA 
has a huge influence over our housing market and the entire 
American economy. You have awesome powers. This comes at a time 
when house prices were soaring to record levels and families 
were seeing their mortgage rates skyrocket. So, I look forward 
to your testimony today about your vision for FHFA, your 2021 
report to Congress, your plans to finalize the long-overdue new 
products and activities rule, and to ensure that taxpayers are 
protected in the face of what I believe is financial laxity in 
your policies at the Agency.
    And I yield back. Thank you, Madam Chairwoman.
    Chairwoman Waters. Thank you very much.
    Mr. McHenry. Madam Chairwoman, I would ask for a point of 
personal privilege.
    Chairwoman Waters. The gentleman is recognized.
    Mr. McHenry. I just want to take a moment to note a 
distinguished guest we have in the audience, and that is Mr. 
Clinton Columbus Jones, who worked on this committee for 24 
years before making the jump to FHFA, where he is now the 
General Counsel. This is the room where it all started for 
Clinton. We will skip over the HUD time before that, Clinton.
    [laughter]
    Mr. McHenry. But I wanted to, on behalf of the committee 
and the 7 Chairs under which Clinton served, say, happy 
birthday. Today is Clinton's 32nd birthday.
    [laughter]
    Mr. McHenry. Happy Birthday, Clinton.
    Chairwoman Waters. Thank you very much for welcoming Mr. 
Clinton back in a different position. I don't want to know 
about him. I want to know about his son.
    [laughter]
    Mr. McHenry. Oh, that's so true.
    Chairwoman Waters. Thank you. I want to welcome today's 
distinguished witness, the Honorable Sandra L. Thompson, 
Director of the Federal Housing Finance Agency.
    You will have 5 minutes to summarize your testimony. You 
should be able to see a timer that will indicate how much time 
you have left. I would ask you to be mindful of the timer and 
quickly wrap up your testimony.
    And without objection, your written statement will be made 
a part of the record.
    Director Thompson, you are now recognized for 5 minutes to 
present your oral testimony.

   STATEMENT OF THE HONORABLE SANDRA L. THOMPSON, DIRECTOR, 
             FEDERAL HOUSING FINANCE AGENCY (FHFA)

    Ms. Thompson. Chairwoman Waters, Ranking Member McHenry, 
and distinguished members of the committee, it is a great honor 
to appear at today's hearing. My name is Sandra Thompson, and I 
am the Director of the Federal Housing Finance Agency. I have 
had a 30-year career as a financial regulator. I served more 
than 2 decades at the FDIC, and just over 9 years at FHFA. I 
was sworn in as Director just last month after serving as 
Acting Director for the past year.
    From my experience through two financial crises, I have 
learned that safety and soundness, and sustainable access to 
credit, work together to strengthen financial institutions, 
families, and the economy. Actually, sustainable access to 
credit requires prudent lending standards. The Enterprises have 
been in conservatorship for nearly 14 years, and their 
financial condition is a high priority for the Agency. Although 
the Enterprises are now retaining more of their earnings and 
building capital, it should be noted that there is still a long 
way to go to meet their regulatory capital requirements.
    As of the first quarter of this year, Fannie Mae and 
Freddie Mac combined had more than $80 billion in capital 
reserves. In February, FHFA finalized important enhancements to 
the capital framework. These changes have enabled the 
Enterprises to improve their capital position and have provided 
them with the necessary incentives to transfer mortgage credit 
risk to private investors. This helps protect taxpayers while 
still requiring the Enterprises to hold a substantial amount of 
capital.
    The housing market has faced several years of rapidly-
rising home prices and limited housing supply. In addition, 
interest rates have risen nearly 250 basis points in less than 
6 months, making housing affordability a real challenge. I 
share your concern about the struggle for many homeowners and 
renters to find an affordable place to live. FHFA is taking 
incremental steps to help increase the supply of multifamily 
rental housing by raising the Enterprises' Low-Income Housing 
Tax Credit (LIHTC) investment allocations, which is an 
important source of funding for new, affordable rental housing. 
We also require that at least 50 percent of the Enterprises' 
multifamily business be mission-driven affordable housing.
    FHFA has taken a number of steps to continue providing 
liquidity in underserved areas. We recently proposed new 
affordable housing goals for the Enterprises and asked them to 
strengthen their duty-to-serve plans. The statutory duty to 
serve is particularly important because of its focus on areas 
with a great need: rural and tribal areas; manufactured 
housing; and affordable housing preservation.
    In addition, the Enterprises have recently published 
equitable housing plans to help identify and address barriers 
that prevent otherwise qualified homeowners from gaining access 
to mortgage credit, particularly in communities of color. Under 
these plans, both Enterprises will consider a borrower's 
positive rental history in the underwriting of a mortgage. This 
is data that has not traditionally been included in the 
calculation of credit scores. It is one step in a series of 
efforts the Enterprises are exploring to help expand 
sustainable homeownership opportunities for underserved 
populations and support a more-equitable housing finance 
system.
    While there is a lot of attention on the Enterprises, the 
Home Loan Bank System is also important as it provides critical 
support for small and community banks. As we near the 100th 
anniversary of the Banks, now is a good time to reexamine their 
approach to ensure that they continue to serve the needs of 
today and tomorrow. We plan to engage a variety of stakeholders 
in the coming months as we complete this review, and, of 
course, we welcome the input of Members of Congress. These are 
just a few of the many ongoing initiatives at FHFA to fulfill 
its mission of ensuring the safety and soundness of our 
regulated entities and promoting access to affordable and 
sustainable housing.
    Before I close, I would like to acknowledge and thank the 
dedicated public servants at FHFA who work diligently to 
accomplish our mission. And thank you again for the opportunity 
to testify before you. I look forward to working with the 
members of this committee and answering any questions you may 
have.
    [The prepared statement of Director Thompson can be found 
on page 54 of the appendix.]
    Chairwoman Waters. Thank you, Director Thompson. I now 
recognize myself for 5 minutes for questions.
    Director Thompson, FHFA has taken important steps under 
your leadership to begin to address the racial homeownership 
gap, including taking a close look at appraisal disparities, 
expanding the eligibility for more affordable refinance 
options, and publishing the equitable housing finance plans of 
Fannie Mae and Freddie Mac, which marks the first time the 
Enterprises have had to make intentional plans to redress 
racial inequities in their books of business. Can you tell us 
more about what your approach has been in targeting inequities 
in today's housing market, and what further steps you might 
take to help improve equitable access and fair pricing for 
historically-underserved and excluded borrowers?
    Ms. Thompson. Thank you for the question. First, I am a 
career safety and soundness regulator, so everything that we do 
at FHFA has to be grounded in safety and soundness. After the 
last crisis, we learned a very valuable lesson, and the thing 
that I took away from that is that safety and soundness and 
access to credit are two sides of the same coin. They work hand 
in hand for the betterment of our country.
    One of the things that we have done at FHFA is to focus not 
just on standard business that the Enterprises buy in terms of 
loans, but we have also asked them to focus on underserved 
communities. This includes rural areas, tribal communities, and 
other areas where there is just not enough access to liquidity. 
One of the more recent things that we have done is we have 
asked the Enterprises to look at previously-redlined areas and 
try to figure out what barriers exist for borrowers who are 
otherwise qualified, but are not able to access credit. We 
believe that some of the initiatives that the Enterprises will 
undertake in this area will benefit all homeowners and 
potential homeowners.
    I will give you the example that I used in my oral 
testimony. One of the things that both Fannie and Freddie are 
doing is incorporating positive rental payments into the 
underwriting calculation. This is practical. A home or rent 
payment is the largest payment most people make every single 
month, and if people are able to pay their rent on time, why 
shouldn't those payments be considered in terms of determining 
whether they are able and/or willing to pay?
    So, this is an opportunity that was included in the 
equitable housing plan, but it applies to all borrowers or all 
renters, and we just think that things that can be impactful 
will impact the entire population.
    Chairwoman Waters. Thank you for that answer. I would like 
to go on. While the skyrocketing appreciation of home prices 
during the pandemic has put homeownership even further out of 
reach for many, research from the Urban Institute has shown 
that there are still some communities throughout the country 
where homebuyers can purchase homes for less than $100,000, but 
only if they can pay all in cash, because mortgage lenders are 
unwilling to make such small mortgages. In 2019, over a quarter 
of all home sales were for homes priced at or below $100,000, 
yet only 1 in 4 were financed with a mortgage. These are some 
of the most affordable homes in America, and they are out of 
reach because of a lack of financing.
    Is there anything that FHFA can do to help encourage more 
small-dollar mortgage lending? Is there any legislative 
authority that you need to tackle this issue? I am certainly 
interested in working with you on it.
    Ms. Thompson. Certainly, and we believe that small-balance 
loans and providing financing for those loans are very 
important, whether it is to purchase or refinance. One of the 
items that we have directed the Enterprises to look at this 
year, and it is in the scorecard that sets the 4th-year 
priorities, is to look at ways to enhance more small-balance 
loans. And we will be happy to work with the committee on any 
legislation that would be helpful in that area.
    Chairwoman Waters. Thank you very much, and I will now call 
on the ranking member, Mr. McHenry, for his questions.
    Mr. McHenry. Thank you, Madam Chairwoman, and Director 
Thompson, thank you for your career in public service. Your 
skill set is well-tuned to being a safety and soundness 
regulator because that is what your career is in. So, although 
markets are different than your previous career, you have the 
skills for this, and I am grateful for that, especially 
considering how large the portfolio you oversee is and how 
important it is to the American economy.
    But let's start with oversight. Under the statute, you have 
a requirement to testify annually, so is it your intention to 
follow that statute?
    Ms. Thompson. Sir, it is my intention to be at the call of 
the committee whenever they request me to come up, with the 
Full Committee or individual Members. I am happy to do that.
    Mr. McHenry. Thank you. We are concerned about 
transparency. You have a very important agency. You don't have 
a statutorily-broad requirement for transparency other than the 
testimony piece of that, and so we would like to hear more 
about your plans going forward.
    But let's start with what you oversee, which is the housing 
market. We had an all-time low mortgage rate of 2.65 percent, 
and 18 months later, we are back to 6, 7 percent mortgages. We 
have inflation. Give me your view on the outlook of the housing 
market.
    Ms. Thompson. Sure. The housing market has been very 
volatile in the past 6 months. As you have mentioned, we went 
from record low interest rates to an increase in interest 
rates, almost 250 basis points in about 6 months' time. And we 
have also had a persistent supply issue or a lack of not just 
affordable supply, but supply generally. When you look at the 
rising interest rates, when you look at the lack of supply, you 
also have seen an historic increase in home prices, which is 
tempering just a little bit.
    But when you look at all three of these components, it is 
really difficult from an affordability perspective to have 
borrowers, or prospective borrowers, be able to get homes. 
Certainly what they could afford 6 months ago, they can't 
afford now, because the interest rates have almost doubled. And 
it is just an environment that is very challenging, and the 
supply issue is also quite challenging because there just isn't 
enough supply, especially at the entry level, for persons to 
enter homeownership. We look at the characteristics of the 
mortgages that both Fannie and Freddie are buying. We look at 
interest rates.
    And, in fact, after 2021, which was a record year for 
refinances, we looked at the portfolio. And there were still 
mortgages on the books that had been there for a while, that 
had interest rates of over 5 percent, and we were just 
wondering why people were not refinancing or taking advantage 
of those opportunities. We look at trends, we look at risk 
characteristics, and we look at loan factors so that we can 
make assessments on the risk profile, of the profile of the 
Enterprises.
    Mr. McHenry. Okay. Let's get to that risk profile. 
Congress, from time to time, has had plans to have these 
Enterprises exit from conservatorship, and the Republican side 
of the aisle put out a bill for two Congresses on that. We 
welcome discussions from our committee Democrats on this, and 
we welcome the housing finance reform discussion, and this 
hearing gives you an opportunity to say that to them publicly. 
But along those lines, there are pros and cons to 
conservatorship and for this sort of halfway point that we have 
that you are overseeing. What are the cons? What are the pros?
    Ms. Thompson. First, after coming from the FDIC, I don't 
think it was anybody's expectation for the Enterprises to be in 
conservatorship for 14 years, but I would say that some 
progress has been made just in terms of standardization, in 
terms of alignment. When the pandemic arose, for example, we 
were able to call the Enterprises together and put together new 
policies for loss mitigation so that borrowers who were 
impacted would have opportunities to be reinstated with your 
mortgages, and the pandemic wouldn't be as impactful as it was. 
And servicing standards have been aligned, data has been 
aligned for the mortgage industry, so there has just been a lot 
of positive improvements over time.
    The one issue in terms of a con, I would say, is just the 
uncertainty about the status of the Enterprises. I am the sixth 
Director, and this issue has been in place for four 
Administrations, six Directors, and continues just in terms of, 
what is the future of the Enterprises? How are we going to get 
together? And it is just the uncertainty that is about the 
future that probably needs to be addressed by the Congress. But 
I do think that there are pros and cons, and I do think that 
the decision as to what happens certainly is up to Congress.
    Mr. McHenry. Thank you.
    Chairwoman Waters. Thank you. The gentleman from New York, 
Mr. Meeks, who is also the Chair of the House Committee on 
Foreign Affairs, is now recognized for 5 minutes.
    Mr. Meeks. Thank you, Madam Chairwoman. Thank you for 
having this very timely hearing, and congratulations, Ms. 
Thompson, on being the Director of the Federal Housing Finance 
Agency. We know that you are going to do a very great job at 
it.
    Director Thompson, one of the things that I have found to 
be a huge barrier to homeownership in communities of color in 
particular is they are crippled by student debt, and it serves 
as a massive hindrance to being able to make the next step 
towards generational wealth building. Many years ago, that was 
one of the things that was hard for me. I had all of this 
student debt, but I wanted to buy a house, and there is a 
different consideration. This debt has serious implications for 
qualification for loans. That is what happened to me, but the 
student debt is not always treated the same by the various 
GSEs.
    I have a bill called the Expanding Homeownership for 
Borrowers with Student Debt Act, which requires certain 
agencies to more fairly treat student loan borrowers looking to 
obtain an affordable mortgage through various programs. What 
are the positive impacts that this type of uniformity and 
alignment can have on student borrowers as their student debt 
is assessed for loan qualifications, regardless of where they 
seek out their loan?
    Ms. Thompson. Thank you for the question, and student debt 
certainly is taken into consideration in different ways 
throughout the mortgage industry. And this is definitely an 
area that we would be able to work with you on in terms of 
trying to figure out how it is assessed today, and how it 
should be assessed going forward, in terms of homeownership and 
also the impact on credit scores.
    Mr. Meeks. Yes, I would love to work with you on that, and 
I will have my office follow up with yours because I am still a 
big believer that the way that we close the wealth gap is 
homeownership. Look at folks today, even within the middle of 
this crisis, with the cost of rent, I am still trying to get 
people to be homeowners. And working with you and trying to 
figure that out is something that is of huge importance to me, 
and I have used a lot of times, looking at the young people in 
my district, I have found that there has been a dramatic growth 
in fintech innovation leading to some rapid changes in our 
financial markets, particularly in the housing space, where 
fintechs are changing the landscape of how underwriting and 
mortgage processes operate, including loan origination and 
assessing credit risks.
    Given this rise in fintech, and I see all the young people, 
they are just online. When my daughter was buying a house, they 
didn't go to the bank. They went to a fintech. But I know that 
just this week, you announced the establishment of the Office 
of Financial Technology at FHFA, which aims to evaluate the use 
of fintechs in housing finance. What are some of the benefits 
as well as the risks you expect the Office to identify, and 
will this Office look to put racial equity at the forefront of 
their engagement with these issues?
    Ms. Thompson. Sure. Thank you, and we did this week 
establish an Office of Financial Technology. And, as you 
mentioned, financial technology, or fintech, is used in the 
mortgage process, and we need to get a better understanding of 
what these products are and how they are used, and to make sure 
that they are used in a safe and sound manner. We do think that 
there are opportunities to use technology in the mortgage 
process because it takes a very long time to go from 
application through closing. And there has to be a way to try 
to make the mortgage process cheaper for the borrower, faster, 
and also when you use technology, you often get good risk 
management practices.
    One of the things that I have mentioned, and this is 
something that we have learned during the pandemic, is that 
when the interest rates were really low, people were trying to 
take advantage of refinances, and to refinance, you have to 
have an appraisal. The appraisers didn't want to go into the 
homes, and nobody wanted to let appraisers in, because this, 
again, was when the pandemic started, and we were able to use 
technology in a very meaningful way and introduced desktop 
appraisals, and that is now one of the staples of the 
Enterprises. It is one of the things that we learned during the 
pandemic that we have now made a permanent policy. And we think 
that these types of tools can be helpful in the mortgage 
process in terms of making it shorter and also more efficient 
in bringing risk management to the process.
    Mr. Meeks. Thank you. I see I am out of time, so I yield 
back, Madam Chairwoman.
    Chairwoman Waters. Thank you very much. The gentlewoman 
from Missouri, Mrs. Wagner, is now recognized for 5 minutes.
    Mrs. Wagner. Thank you, Madam Chairwoman, and I am so very 
pleased that we are having a most relevant housing hearing at 
last. Director Thompson, I thank you for joining us today. It 
has been far too long since this committee has been able to 
perform its duty to conduct oversight at your Agency. I 
appreciate your willingness to be transparent and to be willing 
to take our calls and meetings.
    With your significant safety and soundness regulatory 
background at FHFA and previously at the FDIC, what 
precautionary and preemptive steps are you taking with the GSEs 
as they head into these economic headwinds--that is all we can 
call them--of interest rate hikes, a lack of housing supply, 
unsustainable home price appreciation, and inflationary 
pressure?
    Ms. Thompson. Thank you for the question, and, again, I am 
a lifelong safety and soundness regulator, and we take that 
responsibility very seriously, but we also couple that with 
access to credit. I just want to really be clear that when we 
talk about access to credit and we talk about affordability, we 
are also talking about sustainability. Our work with the 
Enterprises is really grounded in safety and soundness, and we 
want to make sure that borrowers have loans that they 
understand and loans that they can afford. And from our 
perspective, it just doesn't make sense for a borrower to get 
into a house and not be able to keep a house, so we are really 
focused, laser focused, on sustainability.
    Mrs. Wagner. These are very rocky times and we don't want 
people to get in over their head, and we hope that there will 
be more settling down and stability in the market. Whether you 
agreed or disagreed with his views, your predecessor had a 
clear vision for the Enterprises and a plan to get them out of 
conservatorship. What is your vision for GSE reform?
    Ms. Thompson. We are taking steps to make sure that the 
Enterprises are run in a safe and sound manner, and that they 
are continuing to build capital. As you know, the Enterprises 
were just allowed to retain all of the capital that they earn, 
just over a year now. And between the two of them, they have 
about $80 billion in capital, so we are consistently allowing 
the Enterprises to build capital. We are also putting in place 
the provision to allow them to transfer credit risk away from 
the Enterprises and also the taxpayers to private investors. As 
you know, the Enterprises are probably the largest holder of 
mortgage credit risk in the country, and to move that credit 
risk to the private sector, we think is really important. So, 
there are a number of steps that we are taking--
    Mrs. Wagner. And let's talk about that for a minute 
because, Director Thompson, under your leadership the FHFA 
revised your predecessor's capital rule, which will result in 
the Enterprises holding less capital, and therefore, being more 
vulnerable to losses that the taxpayers will have to bear. 
Director Calabria's rule would have required the Enterprises to 
hold around $250 billion combined capital, which was above 
their previous $45 billion capital on retained earnings. In 
revising the rule, did FHFA calculate what the impact of the 
changes to the capital rule would be in terms of how much 
capital the Enterprises would be required to hold?
    Ms. Thompson. Yes, another good question. We did take into 
consideration the capital requirements. The reason that we 
changed the rule was to really help facilitate credit risk 
transfer. A credit risk transfer program is really important 
because again--
    Mrs. Wagner. I am running out of time. Do you have a 
specific number? Can you describe the process, something? That 
is what I am looking for here.
    Ms. Thompson. Okay. I think the number that was going to be 
required before was $316 billion, and now is $300 billion, and 
there was a de minimis change. But the purpose was to really 
move the credit risk to the private investors.
    Mrs. Wagner. So, you are going to make sure that they are 
holding around $300 billion in combined capital?
    Ms. Thompson. That is the requirement, and, of course, that 
changes based on the amount of assets that they hold.
    Mrs. Wagner. As we don't want to weaken the capital buffer 
as we are heading into what could potentially be a recession, 
do you agree that it makes more sense to strengthen the capital 
reserve at Fannie and Freddie to avoid another taxpayer 
bailout?
    Ms. Thompson. Yes, I do agree that it is important to 
strengthen the capital reserve, but we also think it is 
important to transfer credit risk outside of the system to 
private investors.
    Mrs. Wagner. Thank you for your input, and I yield back.
    Chairwoman Waters. Thank you. The gentleman from Georgia, 
Mr. Scott, who is also the Chair of the House Agriculture 
Committee, is now recognized for 5 minutes.
    Mr. Scott. Thank you, and the first thing I want to say is, 
congratulations. You have made history, and you are now the 
first woman ever to lead this most important Agency at the 
right time with the right person. Congratulations.
    First, Director Thompson, I want to ask you this. Back a 
couple of months ago, in April 2022, your Agency directed 
servicers of Fannie Mae and Freddie Mac loans to pause 
foreclosures for up to 60 days upon notification that borrowers 
applied for pandemic mortgage relief. Can you provide us with a 
specific number of mortgages impacted by your decision?
    Ms. Thompson. Certainly. We think that the Homeownership 
Assistance Fund (HAF) program is really important. It was a 
provision put in place to help both borrowers and renters. One 
of the reasons we put the provision in place to put a halt on 
foreclosures was that we didn't want borrowers or renters to be 
adversely impacted when they were trying to get access, and 
then have a concurrent foreclosure or concurrent eviction. We 
don't have the specific numbers of all of the borrowers who 
have been advantaged by that program, but we do know that of 
the borrowers who were placed in forbearance plans by the 
Enterprises, about 96 percent of them have now exited those 
plans.
    Mr. Scott. They were successful in reducing a borrower's 
monthly payments then. What is your Agency's projection of how 
many homeowners will be unable to resume regular mortgage 
payments after they leave forbearance, and what do you expect 
will be the outcome for them?
    Ms. Thompson. Sure. At the start of the pandemic, about 2.2 
million borrowers entered into forbearance plans. Today, there 
is probably about 90,000 some-odd borrowers who are still in 
forbearance plans. Ninety-six percent of borrowers who entered 
forbearance plans have exited them. And what we found 
particularly interesting was that there are a number of people 
who were in these forbearance plans who continue to pay, even 
though they had signed up for the forbearance, and we put in 
place a modification so that borrowers would not be as severely 
impacted as they otherwise would be if they had the option to 
defer their payment.
    And then the deferred payments, they could reinstate them, 
or they could pay them over time, or they get tacked on to the 
end of the mortgage. But there were lots of modifications that 
were put in place to keep borrowers in their homes. And for the 
almost 100,000 who are left, they are in modification programs, 
and we are hoping that they will have successful workout 
solutions.
    Mr. Scott. Director Thompson, I want the nation to know, 
because one of the most startling statistics when we are 
discussing racial inequality in housing is this, that the Black 
homeownership rate has remained virtually the same as it was in 
1968. This is startling. And right now, there are thousands of 
young people in my district and all of our districts, and 
millions across the nation with a dream of owning their own 
home one day, but who simply cannot afford mortgage payments. 
Let me ask you this: What steps is your Agency taking to ensure 
that first-time homebuyers and first-generation homebuyers, who 
would like to earn generational wealth, can realize their goal 
of homeownership?
    Ms. Thompson. Thank you. And, again, certainly to your 
point, there were a lot of gains that were made, but they were 
lost in the Great Recession as we saw record numbers of 
foreclosures, particularly in communities of color where there 
were a lot of predatory loan practices. Having said that, one 
of the ways to close the equity gap is through homeownership. 
And we want to, again, put in place, or Fannie and Freddie have 
programs in place that allow creditworthy borrowers to take 
advantage of first-time homebuyer programs where they have 
homeownership education and they understand what homeownership 
means.
    One of the provisions they put in place that we think will 
be really beneficial is incorporating the rental payments into 
their credit scores because some people don't have credit built 
up.
    Mr. Scott. Thank you so much, and, again, congratulations. 
I look forward to working with you.
    Chairwoman Waters. Thank you very much. The gentleman from 
Texas, Mr. Sessions, is now recognized for 5 minutes.
    Mr. Sessions. Madam Chairwoman, thank you very much. 
Director Thompson, thank you for taking time to be with us 
today. I have a piece of business that I simply want to bring 
to your attention. Madam Chairwoman, I have a letter that I 
would ask unanimous consent to have entered into the record.
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. Sessions. Thank you very much. This is a letter that I 
have. Republicans--I am a Republican--have been working with 
the Secretary of Housing and Urban Development for months on 
getting more housing in Texas, and we believe that there are 
rules and regulations which could be waived by the Secretary. 
In essence, it goes through it here. I just want you to be 
aware of it, and I am going to make sure that your staff gets a 
copy.
    But what we are trying to do is get the Secretary to look 
at ways within her discretion that she could waive some rules, 
allowing more building without having to tear down something 
that corresponds to that. Like, it is a 1-to-1 ratio when in 
Texas, we need more housing. And I just appreciate your 
attention that you have not been brought into this, but I want 
you to be aware of it. The young chairwoman is also getting 
this for the first time.
    Director, I am interested in hearing from you about the 
President's call across all of government as it relates to 
equality and gender, about how you apply that within your 
Agency and how that is being applied to the loan-making 
process.
    Ms. Thompson. Thank you. Certainly, we at FHFA are 
responsible, as are all of the other financial regulators, for 
adhering to the Fair Housing Act, which looks at equality and 
housing--
    Mr. Sessions. Yes, madam, but you were given that under the 
law also. I am talking about specifically anything new or 
different that you may have undertaken. What I am particularly 
interested in is that it be applied equally to everyone else, 
too, not necessarily to a selected group. And I do think it is 
important, as the President has noted, that they pay close 
attention, but I want to ask, have you taken other facts or 
factors into play as a result of that direct order from the 
President?
    Ms. Thompson. Our primary objective is to comply with the 
law and to make sure that it is applied in our regulated 
entities. We certainly look at programs and policies, but we, 
again, first, want to make sure that they are in compliance 
with the regulations that undergird our authority. And so, 
again, the Fair Housing Act probably has more credence to 
looking at certain characteristics, but we want to make sure 
that the programs and policies that are applied at Fannie and 
Freddie apply to all persons who are eligible and meet the 
criteria.
    Mr. Sessions. In other words, you have not utilized any 
different discretion. You have not utilized anything 
necessarily different with the President's request?
    Ms. Thompson. I don't think that I have done that.
    Mr. Sessions. So, you have not done anything. You looked at 
the law. You looked at the law as needing to be fair and 
equitable anyway, and you have not undertaken any steps within 
these agencies to direct them or to have them change the 
processes that would have been available under the law. That is 
what I hear you saying.
    Ms. Thompson. That is correct, sir.
    Mr. Sessions. Okay. Thank you very much, because we are 
very interested in the success that you have spoken about of 
being fair and doing these things because with the increase of 
interest rates, it is becoming even more critical for people to 
land within housing that is properly within their scope.
    The chairwoman and I lived through what happened in 2008 
and 2009, and we want to make sure we are not going to create 
any sort of a bubble, any sort of an articulation of Federal 
policy that would do anything other than follow the law as it 
has been and as it is now. And I appreciate the gentlewoman for 
her testimony before this committee. Thank you very much. I 
yield back.
    Chairwoman Waters. Thank you. The gentleman from Texas, Mr. 
Green, who is also the Chair of our Subcommittee on Oversight 
and Investigations, is now recognized for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman. It is an honor to 
serve under your leadership. And I would like to thank the 
Director and salute her for having the opportunity to serve in 
such a high capacity within our government. I am confident that 
she will do a stellar job.
    Madam Director, I would like to address two issues. The 
first has to do with something that you have caught our 
attention about, which is purchasing homes. People who can pay 
rental payments timely are likely to be able to make a mortgage 
payment timely. This is something that I concur with. In fact, 
I concur with it to the extent that I can share with you H.R. 
123, a piece of legislation that I have filed in multiple 
Congresses, called the, Alternative Data for Additional Credit 
FHA Pilot Program Reauthorization Act, ``reauthorization,'' 
because we actually passed it in Congress once. So, I salute 
what you are doing, and I would like to have you take a look at 
my H.R. 123 because I am curious as to whether you think that 
it might, in some way, conflict with what you are doing 
currently.
    I salute what you are doing. I don't think we can do too 
much to help people who need some opportunity to own property, 
which is a means by which they can build wealth. H.R. 123 would 
have additional credit scoring in the area of rental payments, 
light bill, gas bill, water bill, phone bill, and other things 
that are not automatically scored. They would then become a 
part of a pilot program to have them scored such that we can 
examine not only the efficacy of simply scoring, but also the 
mechanics of doing it. I think it is a pretty good bill. I have 
sponsored it multiple times, and I would like to have you take 
a look at it, if you would, to give me some commentary as to 
whether or not it would conflict with what you are attempting 
to do with your program. I yield to you for a comment, please.
    Ms. Thompson. Sure. We are happy to work with you on this 
very important issue. We do believe alternative data in 
evaluating credit is very important, and we are happy to look 
at the bill.
    Mr. Green. Thank you. I will make sure that we get it to 
you immediately, if not sooner. Now, I am also concerned about 
the lack of homes available to first-time homebuyers, for 
persons who are wedding, young people, Millennials and 
Generation Z, or persons who are trying their very best to get 
into their first home.
    I am concerned because at a hearing under the leadership of 
the Honorable Maxine Waters, one of the things that I discussed 
at the hearing was a concept known as predatory purchasing. We 
have these major corporations with deep pockets that are buying 
properties out from under first-time homebuyers, and they are 
converting these to rentals. They with their deep pockets can 
make cash offers. The cash offer, in and of itself, will shut 
out a good many persons who have to purchase with credit. My 
concern is with the predatory purchasing and how it is 
impacting the housing market. Currently, I have some indication 
that we need some 300,000-plus, 328,000 new apartments annually 
to meet the demand. That demand is being thwarted to a certain 
extent by this predatory purchasing, in my opinion.
    Are you familiar with what I speak of, and if you are, can 
you give me some thoughts as to how we might manage to let 
young people have the opportunity to purchase their first home, 
to keep homes on the market for first-time homebuyers as 
opposed to having them become rentals wherein persons with 
these deep pockets can raise rents and it becomes very 
profitable for them, but it doesn't help those who are seeking 
homes? I yield to you, Madam Director.
    Ms. Thompson. Okay. We are very familiar with that issue, 
and in 2018, we prohibited the Enterprises from engaging in 
sales with large institutional investors, and this is 
particularly true in the single-family rental space. I think 
both Enterprises had pilot programs and we stopped those, and 
they are no longer able to purchase these loans or these homes 
from these large institutional buyers. One of the things that 
we are doing on the Enterprises' real estate owned (REO) 
portfolios is we have what is called a First Look Program, and 
it is a 30-day window where an owner-occupied or potential 
owner-occupied person has an opportunity to bid on the loan or 
a nonprofit.
    And there is a 30-day window whereby which owner-occupied 
potential tenants or borrowers can take a look at these 
properties before investors start purchasing them. And I do 
think it is important that we make homeownership affordable in 
that all people have the opportunity to purchase these 
mortgages, especially those who can't afford to pay cash.
    Mr. Green. Thank you, Madam Chairwoman. My time has 
expired. Thank you so much.
    Chairwoman Waters. The gentleman from Florida, Mr. Posey, 
is now recognized for 5 minutes.
    Mr. Posey. Thank you very much, Madam Chairwoman. Time 
expired while Director Thompson was answering Congressman 
Greene's question. I am willing to allow her some extra time if 
she wanted to expand her thoughts on a little bit further.
    Ms. Thompson. Thank you. I am fine. Thank you.
    Mr. Posey. Okay. We still call them Government-Sponsored 
Enterprises, or GSEs, but for the last 14 years, Fannie and 
Freddie have been government agencies, pure and simple. I am 
just curious about what FHFA leadership has done to improve the 
safety of the loans securitized by these agencies?
    Ms. Thompson. When we look at the Enterprises' portfolio, 
because of the low interest rates, a lot of the risk was 
removed through refinances where people were able to reduce 
their mortgage payments. We also have seen an increase in home 
prices, which means that the loan-to-value ratios have 
decreased on the Enterprises' portfolio, which means that 
homeowners' equities have increased. And we think that the 
portfolio, as evidenced in terms of how it performed during the 
pandemic, is in a very good position to weather a storm. We do 
monitor the loan characteristics that the Enterprises' 
purchase, and we make sure that they are operating in a safe 
and sound manner. Again, we do take a look from a safety and 
soundness perspective at every single thing that the 
Enterprises do, and we want to make sure that they continue to 
be in good financial condition.
    Mr. Posey. Thank you. Now, the FTC and the Justice 
Department are apparently reviewing the merger between mortgage 
software firms, ICE and Black Knight. I am just wondering if 
you have any concerns about this Big Tech merger and its 
potential impact on the GSEs and ultimately on consumers.
    Ms. Thompson. I don't have any thoughts on that particular 
issue, sir.
    Mr. Posey. Okay. Do you have any plans to remove Fannie Mae 
or Freddie Mac from conservatorship?
    Ms. Thompson. Excuse me, could you repeat the question? I'm 
sorry.
    Mr. Posey. Do you have any plans to remove Freddie or 
Fannie from conservatorship?
    Ms. Thompson. Sir, we are working on, again, approving the 
financial condition of the Enterprises. We think that the 
future state of the mortgage secondary market ought to be 
determined by the Congress, but, again, we are taking steps to 
allow them to build their capital. They are transferring credit 
risk. We also implemented a capital planning requirement for 
both Enterprises as well as a capital disclosure where they 
have to disclose information about their capital position. We 
think that those things are steps that move them towards taking 
good steps to move towards whenever they are out of 
conservatorship.
    Mr. Posey. Okay. Thank you. Data from your Agency says that 
Fannie and Freddie purchased 62 percent of all mortgages 
originated in 2020, and purchased, on average, 54 percent each 
year from 2002 to 2020. What is the Administration's vision for 
increasing the role of the private sector market in the 
secondary mortgage market?
    Ms. Thompson. I know that the Enterprises really play a 
countercyclical role in the mortgage market as evidenced by 
what happened after the Great Recession and also what happened 
in the pandemic. I think when there were sources of liquidity 
that were not available to borrowers across the country, the 
Enterprises did step in. So, we do believe that there is a role 
for the Enterprises. They play a countercyclical role, and they 
certainly did step up and make purchases during and after there 
is a crisis, in particular the pandemic.
    Mr. Posey. Given what happened before the financial crisis, 
would it make sense to limit government exposure in the 
secondary market to those activities that meet our objectives 
for low- to moderate-income homeownership and leave the 
remainder of the markets to the private sector?
    Ms. Thompson. I think the statute requires us to provide 
liquidity to all Americans across the country, and based on 
their eligibility, borrowers can get mortgage loans. So, I 
think that would be something that would have to be decided by 
the Congress.
    Mr. Posey. Very good. I thank you for your direct answers, 
and I yield back the balance of my time.
    Mr. Cleaver. [presiding]. The gentleman yields back. I now 
recognize myself for 5 minutes.
    The gentleman from Texas, Mr. Sessions, had mentioned a few 
minutes ago the 1-for-1 HUD policy--well, he didn't mention the 
1-for-1 HUD policy, but there is a 1-for-1 HUD policy. We can 
only build a new unit or financially support a unit that has 
been demolished, and we ended up having a number of those 
during the Hurricane Katrina crisis. The chairwoman and I, 
along with Mr. Green, toured some of those projects. But in all 
of the projects in which all of the units had been damaged and 
needed to be demolished, we ended up, I think, replacing one 
unit because of the policy. And if the gentleman from Texas is 
interested in that, it is something that we can address, but 
only with an increase in the HUD budget, which we have tried to 
do almost each year, and it is not anything that I think FHFA 
is involved with. It is a HUD policy. But let me say that I 
would love to work with Mr. Sessions on dealing with that issue 
and on increasing the HUD budget.
    My home district would not be this high, but the average 
housing price is over $500,000 in the United States. As I said, 
in my district, it would be less, and so we are always looking 
for ways in which we can construct badly-needed affordable 
housing. And one of the things that I have become quite 
interested in is the CrossMod homes. They are manufactured 
homes. They are built to meet construction and architectural 
design standards, and they are also consistent with site-built 
homes. We have a number of problems. One of them is that there 
appears to be an appraisal bias against the HUD code label, 
which has distorted and made inaccurate appraisals of these 
homes. And I am trying to figure out ways in which we can 
remove the barriers for a significant source of affordable 
homes for American families.
    And so I am hoping, Madam Director, that you can address in 
some way, both here and in your policies, CrossMod homes, by 
addressing the barriers to their adoptions, such as ensuring 
Enterprise guidance will ensure accurate appraisals. If we 
don't get accurate appraisals, we are not going to be able to 
move to this form of housing, which has changed dramatically 
from when I was a kid, when nobody wanted anything to do with 
it. You wanted to move away from it, but now they have changed 
and they meet most standards. But is there a way in which 
appraisals can be examined to allow these CrossMod homes to be 
acceptable?
    Ms. Thompson. Yes. We believe that manufactured housing can 
be a huge benefit to addressing the housing supply issue. We 
are very much aware of the CrossMod appraisal issue, and we are 
working with our regulated entities to see what flexibilities 
there might be in that particular situation.
    Mr. Cleaver. Are you having any ongoing contact about these 
homes?
    Ms. Thompson. Yes. Actually, there was a housing event on 
the Mall, and I went, and walked through, and actually saw 
those CrossMod homes and the manufactured housing that was 
there, and it was just like you said, something that I hadn't 
expected and hadn't seen. The issue about the appraisals was 
raised with me directly as I was taking a tour through those 
homes. And we have committed to working with the Enterprises to 
look at the specific issue that relates to appraisals for these 
properties because, again, with the supply issue being so 
acute, we just believe that this could be a really good 
solution.
    Mr. Cleaver. Yes, I am surprised. I was surprised at the 
new direction they are taking, and they were trying to attract 
congressional attention on them.
    My time has expired. Thank you very much, Madam Director.
    The gentleman from Missouri, Mr. Luetkemeyer, is now 
recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman, and Director 
Thompson, welcome. It's good to see you. The capital rule you 
proposed recommends combined required capital for Fannie and 
Freddie of somewhere between $250 billion and $300 billion. 
This morning, you mentioned that $300 billion is your target. 
I'm glad to see that. I know we had lots of discussions with 
your predecessor with regards to this. I think this Agency was 
tremendously undercapitalized, and I think getting it there is 
where we need to be. As a former regulator, I am sure you 
understand the importance of capital to an entity, and we are 
certainly glad to see you there. Do you think $300 billion is a 
point at which the conservatorship can end?
    Ms. Thompson. I think that when the Enterprises meet the 
capital targets, that is one component of exiting 
conservatorship. There are other factors that need to be taken 
into consideration, certainly conversations with the Treasury 
about the senior preferred shares. There are conversations with 
the Federal Reserve about certain policy issues, like single 
counterparty, what happens if the Enterprises exit and what 
other significant institutions have exposure to the Fannie-
Freddie stock. There are just a number of issues that really 
need to be worked through that. Meeting the capital target 
alone just won't answer those questions.
    Mr. Luetkemeyer. Okay. One of the things that you have 
commented on a couple of times and I am excited about, quite 
frankly, because, again, I had a lot of discussions with your 
predecessor with regards to moving some of this risk to the 
private sector, getting to the secondary market. Can you give 
me an amount or percentage of what you think is adequate and 
what your target would be on it?
    Ms. Thompson. We set targets for the Enterprises to 
transfer credit risk each year through our scorecard, and they 
have to transfer, I think it is 90 percent of certain loans, 
the risky loans. I think the loans have a loan-to-value ratio 
of 60 percent or higher. So, we look at the Enterprises' books, 
and, again, as you know, the Enterprises are the largest 
holders of mortgage credit risk. We want to make sure that they 
transfer, through either the capital market structures or 
reinsurance structures, a great amount of this credit risk to 
private investors so that if there is something catastrophic, 
the risk is not undertaken or borne by just the Enterprises or 
the taxpayers, and that private investors are bearing some of 
that risk.
    Mr. Luetkemeyer. I think it is fantastic. I think moving 
those things off the books to the private sector is extremely 
important. I'm just kind of curious, and I know my colleagues 
will kind of laugh when I ask the question because I am well 
known around here as being concerned about the current expected 
credit losses (CECL) ratio all the time. I know, again, in 
discussion with your predecessor, he indicated this would be 
something you would have to consider. Are you working with the 
new CECL regulations at this point and adjusting your reserves 
for that accounting rule?
    Ms. Thompson. Yes. I am certain that our Office of the 
Chief Accountant is working on that.
    Mr. Luetkemeyer. You are not sure it will be effective at 
this point?
    Ms. Thompson. Yes. I am not sure what the effect is right 
now.
    Mr. Luetkemeyer. Okay. I see my good friend, Clinton, back 
here. He can help me get that information, I assume. Okay. He 
is nodding. Thank you very much. Again, one of the things that 
is concerning right now, especially in this particular climate, 
is inflation and the proposed taxes out there that I think hurt 
the affordability of housing. You mentioned it a number of 
times. Leadership that has been here this morning talked about 
affordability and the ability of people to afford homes, and 
the high cost of those things.
    It is interesting. Yesterday, I got some numbers that just 
floored me. The latest numbers show that cost of goods and 
services will cost the average American household over $8,600 a 
year. That is $165 a week in lost purchasing power compared to 
what they had a year ago. That is unbelievable. That hurts 
their ability to make those house payments that you have on the 
books right now with folks. Do you have the ability to talk to 
the President about affordable housing?
    Ms. Thompson. I have actually talked to the President about 
affordable housing.
    Mr. Luetkemeyer. You talk, too, about the inflation problem 
in this country with regards to the increased value of homes 
and the increased cost of building homes, and then the lack or 
the hit that the wages are taking, so that there is this 
twofold problem: it costs more to purchase a home, yet you have 
less buying power for the individual. Do you talk to him about 
that?
    Ms. Thompson. I think there are a number of people who talk 
to the President about those issues.
    Mr. Luetkemeyer. Madam Director, it is your job to worry 
about the housing industry, about the availability of 
affordable housing. You should be in front of his desk with 
your hand, getting some attention, ``Mr. President, this is a 
huge issue for my Agency and the people of this country.'' Are 
you not having that discussion?
    Ms. Thompson. We have discussions with all of the housing 
regulators and all of the interested parties.
    Mr. Luetkemeyer. Including the President?
    Ms. Thompson. With the Economic Council, whether it is 
national or domestic.
    Mr. Luetkemeyer. Including the President?
    Ms. Thompson. I have had conversations. I have been in a 
briefing with the President to speak about housing issues.
    Mr. Luetkemeyer. I am curious about your response.
    Mr. Cleaver. Thank you. Your time has expired.
    Mr. Luetkemeyer. Thank you.
    Mr. Cleaver. Mr. Luetkemeyer, thank you. The gentleman from 
California, Mr. Vargas, is now recognized for 5 minutes.
    Mr. Vargas. Thank you very much, Mr. Chairman. Director, 
first of all, I want to congratulate you, like my colleagues, 
and I think you are the right person in the right place at the 
right time, and I also appreciate your background very much.
    Why don't we start with inflation? Mr. Luetkemeyer brought 
it up, and I think it is a good idea to start with that. What 
is the inflation rate in England right now? Do you know?
    Ms. Thompson. I do not.
    Mr. Vargas. It is a little higher than ours. It is 9.4 
percent. We are at 9.1 percent. In fact, if you looked at a lot 
of the industrialized countries, the advanced economies, they 
are running a little hotter than ours. We have an advantage 
that our unemployment rate is lower than theirs and lower than 
many of these countries.
    But anyway, when my colleagues on the other side talk about 
inflation, they make it seem as if it is only in the United 
States and only because of the American President that we have 
inflation. That is not true. The reality is, inflation right 
now affects the whole world, especially advanced economies. 
Anyway, I wanted to bring that up because they always have a 
good time beating up on all of the people who come here about 
inflation as if it was only in the United States. I agree that 
we have to do something about inflation, but at the same time, 
it is the pandemic that has caused all of this and now, of 
course, the war in Ukraine.
    I do want to ask a little bit about the issue of housing 
inflation. Over the last 40 years, the average U.S. house price 
has increased by more than 470 percent because of the increased 
cost of labor, constrained supply chains for housing materials, 
and local zoning restrictions. Many families are being priced 
out of the American Dream. In my district alone, the median 
list price for homes increased 14 percent last year, making San 
Diego one of the most expensive housing markets in the country. 
Can you speak to this aspect of inflation and how this recent 
housing depreciation impacts Americans in need of affordable 
housing?
    Ms. Thompson. Sure. Again, the rising home prices and the 
rising interest rates mean that borrowers cannot purchase as 
much as they could even 6 months ago, and then the supply issue 
that is just really acute, has exacerbated affordability. We 
are starting to see just a little bit of easing in the increase 
in home prices. Last year, we had a record increase in home 
prices, I think it was about 18.5 percent year over year. We 
are starting to see that slow down a little bit across the 
country. But there are pockets, as you mentioned, where there 
are huge increases in home prices, and it is really 
exacerbating the affordability issue.
    So, we do look at that, and we are trying to figure out 
ways to be helpful. In terms of the multifamily business line, 
they are creating multifamily--Fannie and Freddie, in 
particular, are purchasing multifamily loans, and every loan 
that they purchase, about 50 percent of them have to be 
affordable. In addition, we have expanded LIHTC allocations, 
which go to very affordable housing across the country. And so, 
again, while Fannie and Freddie are not directly involved in 
supply issues, there are ways that they can try to be helpful.
    Mr. Vargas. Another concern of mine is that now that we are 
sliding out of the pandemic, and the help that we provided for 
homeowners and renters is basically going away, there will be 
people who can't afford to pay their mortgages and they will 
need some flexibility. Have you done any studies to look at how 
many people will be foreclosed upon because of this issue, and 
what can we do?
    Ms. Thompson. I can tell you that when the pandemic 
started, there was a little over 2 million borrowers who 
entered into forbearance programs, and today, there are less 
than 100,000. I think there are about 94,000, 95,000 borrowers 
who are still in forbearance programs. The Enterprises have 
very effective loss mitigation programs, so when borrowers get 
in trouble, they can contact their servicers, and they can go 
into a workout solution that would allow them to modify the 
loan or defer the payment. So, we are really focused on home 
retention, and for those borrowers who are in trouble, they can 
contact their servicers and really try to get a loan 
modification or workout.
    Mr. Vargas. Okay. I think you are the right person at the 
right time for all this, and again, I thank you for your 
service. I wish you the best of luck, and I hope you do come 
back to us every year. Thank you for being here. Thank you, Mr. 
Chairman. I yield back.
    Mr. Cleaver. The gentleman yields back. The gentleman from 
Kentucky, Mr. Barr, is now recognized for 5 minutes.
    Mr. Barr. Thank you, Mr. Chairman. And to my good friend 
from California, I would just note that inflation rates for 
most recent months in the selected countries that belong to the 
Organisation for Economic Co-operation and Development (OECD), 
the industrialized countries, the vast majority of those 
countries, including all but one G7 country, have inflation 
rates lower than the United States. And the countries that have 
higher inflation rates are, in large part, those countries that 
are uniquely impacted by the Ukraine situation. What is 
different about the United States is bad fiscal policy 
compounded by monetary policy errors. And so, to my friend from 
California, if you are wondering about the unaffordability of 
gas and groceries and housing, we need to look at our own 
policies with an eye towards reversing the course on 
overspending and constraining supply, such as constraining the 
supply of energy.
    But let's talk about the safety and soundness of the 
Enterprises and get back on topic, Director Thompson. I am 
concerned about the increased risk-taking by the Enterprises 
under various initiatives that have been recently announced by 
FHFA and/or the Enterprises. One potential check on excessive 
or creeping risk-taking by the Enterprises is maintaining a 
robust role for private capital in pricing credit risks ahead 
of and alongside the Enterprises. This is obviously one reason 
that the charter requirement for private credit enhancement for 
higher loan-to-value mortgages exists. Requiring the 
Enterprises to programmatically issue credit risk transfers is 
another mechanism which provides an independent market base 
check on the risks that the Enterprises are taking. And I 
compliment the Director for working to recalibrate the 
Enterprise Regulatory Capital Framework to enable more credit 
risk transfers.
    My question is, can you tell us specifically what FHFA is 
doing to ensure that the Enterprises continue to shed this risk 
to private markets through a variety of executions and 
counterparties to help limit taxpayer risk, and explain that 
tweak to the regulatory framework?
    Ms. Thompson. Sure. Thank you for the question. Credit risk 
transfer is something that is really important from a safety 
and soundness perspective. We can't have what happened in 2008 
happen again, and the Enterprises are, again, the largest 
holders of credit risk in the country, so the Credit Risk 
Transfer Program that was started in 2013 has been very 
effective. There are a number of ways to transfer credit risk 
into the private sector so that if there is an unexpected or 
catastrophic loss, the private sector is helping to offset some 
of those losses, because otherwise, it would be on the backs of 
the taxpayers.
    Every year, we set forth credit risk transfer requirements 
for the Enterprises, and we meet with them on a regular basis 
to make sure that they are effectuating those transactions. And 
again, everything that we are doing is going to be undergirded 
by safety and soundness, because their financial condition is 
so important to us in making sure that what happened before 
doesn't happen again.
    Mr. Barr. Let me also talk to you about your role on the 
Financial Stability Oversight Council (FSOC) and the importance 
of enabling credit risk transfers through the private bank 
capital requirements, because if private bank capital 
requirements become excessively high, it is an impediment to 
credit risk transfer (CRT). In your role on FSOC, have you had 
a dialogue with the banking regulators and maybe the potential 
incoming Vice Chair for Supervision, Mr. Barr, around the 
appropriateness of also giving banks capital credit for credit 
risk transfer?
    Ms. Thompson. I am happy to have that conversation with 
Acting Comptroller Hsu, incoming Vice Chair of Supervision 
Barr, and Acting Chairman Gruenberg.
    Mr. Barr. That is important, and I appreciate you doing 
that. Final question, when the FHFA updated the conforming loan 
limits for single-family mortgages that can be acquired by the 
GSEs, you raised the baseline over 18 percent, or $100,000. 
These new limits will allow Fannie and Freddie to subsidize the 
purchase of an over $1-million home, even though they were 
intended to serve those with modest means. Should FHFA 
reevaluate the 2022 update to the conforming loan limits to 
ensure that Fannie and Freddie are serving low- and moderate-
income individuals?
    Ms. Thompson. This is a statutorily-required calculation 
that we have done every single year, and we are following the 
law and the statute as written. And we are happy to work with 
you all if you would like to change it or tweak it.
    Mr. Barr. On safety and soundness, a million-dollar home 
sounds like quite a bit for your mission, but I appreciate your 
consideration. I yield back.
    Mr. Cleaver. The gentleman yields back. The gentleman from 
California, Mr. Sherman, who is also the Chair of our 
Subcommittee on Investor Protection, Entrepreneurship, and 
Capital Markets, is now recognized for 5 minutes.
    Mr. Sherman. I have a couple of comments on comments made 
by our Republican colleagues. First, on inflation, thank God 
Democrats pushed for fuel economy standards. If we were still 
getting the fuel economy that I got in my 1975 Plymouth Fury, 
we would have to buy 3 times as much gas. We would have triple 
the demand for gasoline, so we would have much higher prices, 
and we would be buying 3 times as much.
    There are those who say we should end the conservatorship. 
I think the GSEs are and should be government agencies. They 
make money for the government, and they give us much lower 
interest rates than we would have otherwise. They do so because 
we have a government guarantee of the debt risk, while the 
private sector assumes the interest rate risk. If we didn't 
have Fannie and Freddie, et cetera, we would not have 30-year 
fixed-rate mortgages. The shareholders were wiped out in any 
economic sense in 2008. They do not have a right to have us, at 
our cost, rehabilitate their private banking entities. And what 
we saw is that when you have the GSEs strive for profits for 
private shareholders but have a full government guarantee, you 
have socialism for the well-connected and the rich, and you 
have a bad system.
    Now, in response to one of my Republican colleagues asking 
you why you don't limit the GSEs to, in effect, lower- to 
middle-income loans, you correctly responded that it was 
because Congress has told you to do really the entire middle-
class. And under the formulas, we have a conforming loan rate 
of $647,000 in most of the country, and $970,000 in high-cost 
areas, and that is pursuant to congressional enactment. And 
that $970,000 loan gets you a 3-bedroom home in my district, 
whereas the $647,000 gets you a 4-bedroom or 5-bedroom home in 
Nebraska or Kansas.
    The question I have is, why do we have higher fees on some 
conforming loans, those in higher-cost areas? Congress has said 
that a conforming loan is a conforming loan, and a high-cost 
area conforming loan is up to $970. And the GSEs have decided 
there is a real conforming loan and there is a not-so-real 
conforming loan, and the 2-bedroom and 3-bedroom houses in the 
chairman's district will be subject to a big fee. Why are we 
treating all conforming loans equally?
    Ms. Thompson. Let me just say that the conforming loan 
limit, again, is required by statute, as you stated. And for 
many of the conforming loans, even for first-time homebuyers, 
especially in high-cost areas, if they have an area median 
income of less than 100 percent, there is no fee, and that is 
true across-the-board. I just wanted to make sure--
    Mr. Sherman. But somebody with an income above average in 
Nebraska gets a conforming loan, and somebody in California 
gets a penalized conforming loan. That is not what Congress 
provided, but I want to move on to another question and that is 
these Property Assessed Clean Energy (PACE) loans. In effect, 
the agencies you oversee, you draft all of the mortgages that 
are used in the country. Those mortgages contain a Paragraph 4 
that says you can't have a superior lien, but under these PACE 
loans, you, in effect, do have a superior lien. Why aren't you 
requiring these GSEs to modify their form so as to clarify that 
under Paragraph 4, you can't get around the requirement of 
turning the first mortgage into a second mortgage just by 
calling it a part of your property taxes? Why don't we amend 
Paragraph 4 and protect the GSEs from this?
    Ms. Thompson. Certainly, that is something that we can look 
into. The Enterprises having priority lien status is pretty 
important, but we can--
    Mr. Sherman. And under these PACE loans, your first is 
turned into a second?
    Ms. Thompson. That is a requirement, and, again, we can 
look into that.
    Mr. Sherman. I look forward to working with you on that. 
And finally, I would hope that you would change the lending 
caps on multifamily because we have a crisis. The rents are too 
high, and people are sleeping on the streets. I yield back.
    Chairwoman Waters. Thank you. The gentleman from Texas, Mr. 
Williams, is now recognized for 5 minutes.
    Mr. Williams of Texas. Thank you, Madam Chairwoman, and 
thank you for being here, Director Thompson. The GSEs have been 
in conservatorship for 14 years now, and former FHFA Director 
Calabria had made it a priority to get these Enterprises out of 
government control and back in the hands of the private sector. 
He had a clear focus for the Agency, and every action seemed to 
be building towards that ultimate goal. However, since you have 
overseen the FHFA, it does not seem like there is a similar 
focus on working to get away from the conservatorship. Director 
Thompson, do you think there are any negative consequences if 
we retain the status quo of the GSEs in perpetuity?
    Ms. Thompson. Thank you, and I would say that we are 
working diligently to make sure that the Enterprises are in 
good financial condition, and that they are operating in a safe 
and sound manner, and we think that these things are 
prerequisites to them exiting conservatorship. We are making 
sure that they are retaining their capital and earnings, and we 
are also, again, focusing them on credit risk transfer so that 
we are taking incremental steps to prepare them. Certainly, 
there are pros and cons for being inside of conservatorship and 
outside of conservatorship, as I spoke to earlier, and we just 
think that, again, Congress can decide what it wants to do with 
the secondary market. And in the meantime, we will continue to 
prepare the Enterprises in a safe and sound manner.
    Mr. Williams of Texas. I am concerned with the one-size-
fits-all approach that we have the FHFA and the GSEs are taking 
with respect to lease terms. In the manufactured housing space, 
Fannie and Freddie are attempting to nationalize landlord 
tenant law by requiring lease terms that are in conflict, 
frankly, with the current laws of several States. And, in fact, 
every State in the country would be out of compliance with the 
new national standards being set by the GSEs. These changes 
were done without any stakeholder input, with one GSE simply 
publishing the change on its website. Director, are you 
concerned that your Agency unilaterally made a single Federal 
standard that is at odds with every other State's laws, and 
will you commit to working with stakeholders to come up with a 
better solution than that?
    Ms. Thompson. Thank you for the question. Really, we are 
always happy to work with stakeholders. We do believe that 
tenant protections are important, and we did have outreach 
sessions with various stakeholders to have a conversation about 
them. And the tenant protections that are required are giving 
notice to renters before they are evicted, or giving notice to 
a borrower before rent is raised. But if there are things that 
are prohibitive, we are certainly willing to work with 
stakeholders at the State or local levels on these issues.
    Mr. Williams of Texas. Okay. I am concerned about a trend I 
am seeing now in the Biden Administration where they just label 
anything that President Trump did as bad, and therefore, it 
must be reversed. There seem to be a few examples of this 
coming out of your Agency that were overturned without much 
justification. Quickly, Director, how did reversing Director 
Calabria's rule that limited the GSEs' ability to purchase 
mortgages from second and vacation homes further the mission of 
the FHFA?
    Ms. Thompson. We put that provision on pause that was part 
of the agreement that was embedded in the preferred stock 
purchase agreement that FHFA and Treasury are a party to. I am 
a lifelong safety and soundness regulator. This risk management 
is what we do, and we certainly are looking at the loan 
characteristics, whether they are seconds or investors, and we 
are also looking at debt-to-income ratios. We are looking at 
LTVs. We are looking at all of these things on a daily basis, 
and these are the things that we ordinarily do as regulators 
and as conservators. And again, we are effective risk managers, 
and safety and soundness is really undergirding everything that 
we do.
    Mr. Williams of Texas. Okay. Madam Chairwoman, I yield 
back. And Director, thank you for being here.
    Chairwoman Waters. Thank you. The gentleman from Illinois, 
Mr. Foster, who is also the Chair of our Task Force on 
Artificial Intelligence, is now recognized for 5 minutes.
    Mr. Foster. Thank you, Madam Chairwoman. Director Thompson, 
in May of this year, this committee passed my bill, H.R. 7022, 
the Strengthening Cybersecurity for the Financial Sector Act of 
2022. This bill would give FHFA the authority to regulate and 
examine the third-party service providers of its regulated 
entities. This is similar to the existing authority that 
prudential banking regulators have over banks' third-party 
vendors under the Bank Service Company Act.
    The Financial Stability Oversight Council (FSOC) noted in 
its 2021 annual report that some regulators, including FHFA, 
``continued to have limited authority to regulate and supervise 
third-party service providers.'' I am very concerned about the 
risks that third parties may pose to individual financial 
institutions as well as to the entire financial system, given 
how interconnected our system is, and how many of these third 
parties are, in fact, core providers to not just one, but 
several financial institutions. Director Thompson, could you 
tell us the extent of FHFA's current authority over the third-
party providers to Fannie Mae, Freddie Mac, and the Federal 
Home Loan Banks?
    Ms. Thompson. Sure. That is a great question, and thank you 
for asking it. The Agency has been asking for a number of years 
for the third-party service provider oversight, and this is 
something that is similar to what the banking regulators have 
through the Bank Service Company Act. In fact, when I got to 
the FHFA from the FDIC, I was very surprised that we didn't 
have that authority because, as you say, the services that are 
provided to our regulated entities are really important. They 
could impact the safety and soundness of our regulated 
entities. And so, we just want comparable authority similar to 
that which the other regulatory agencies have, so that we can 
ensure the safety and soundness of our regulated entities. So, 
thank you for that.
    Mr. Foster. Thank you. In your view, would it also be 
helpful for the Federal Housing Administration (FHA) to have 
this authority to examine and regulate third-party vendors, to 
the Enterprises and the Federal Home Loan Banks?
    Ms. Thompson. I am not going to speak for them. If we can 
stick to the FHFA for this authority, I would be very happy. 
Thank you.
    Mr. Foster. Okay. I will let you off the hook on that one. 
Some of the logic I think sort of speaks for itself. And, 
Director Thompson, while historically-low mortgage interest 
rates have expanded access to credit for many borrowers by 
making the cost of lending more affordable, housing supply 
constraints have continued to lock borrowers out of 
homeownership. According to the Urban Institute and the 
National Association of Home Builders, housing supply is at the 
lowest level of the century, with just 2.6 months' supply as of 
May 2022. The supply shortage is especially acute for low-
income consumers and many first-time buyers who are looking for 
starter homes.
    This lack of supply has led to record year-over-year home 
price appreciation. This measure was 17.5 percent for 2021, 
with some States, such as Arizona, Utah, and Idaho being closer 
to 30 percent. And now, someone said that this is a housing 
bubble that is imminent, reminiscent of what we saw in the 
lead-up to 2008. However, the high levels of home equity have 
been generated at the same time that we have a significantly 
lower level of subprime lending. And we have more responsible 
limits on credit and other reforms put into place by the Dodd-
Frank Act, which hopefully have helped protect the safety and 
soundness of our housing market, despite the recent turmoil and 
the potential for future turmoil.
    Are you nonetheless concerned that record house price 
appreciation could create real estate bubbles in certain 
markets, and is there anything that should be done about that?
    Ms. Thompson. I agree with you in terms of the increase in 
home prices, the increases in interest rates, and the current 
lack of supply. Actually, before the pandemic, there had been a 
persistent lack of housing supply. One of the things that we 
have asked the Enterprises to do is increase their LIHTC 
allocation so that they can start providing supply in low- to 
moderate-income areas to low- to moderate-income individuals. 
And affordability is just a huge issue, both in rental 
properties and in mortgages, so anything that we can do to be 
helpful in that space, we will certainly take those steps. But 
as you know, the Enterprises don't directly impact the supply 
issue, but we certainly will be working with all stakeholders 
to see what we can do to address that issue.
    Mr. Foster. Thank you. I am nearly out of time, so I yield 
back.
    Chairwoman Waters. Thank you. The gentleman from Arkansas, 
Mr. Hill, is now recognized for 5 minutes.
    Mr. Hill. Thank you, Chairwoman Waters, and let me say, 
again, thank you for holding this overdue and very welcome 
hearing. Director Thompson, we are delighted, as I said in my 
opening comments, to have you back. Before you came to the 
Agency, you talked about your background, and 23 years at the 
FDIC, including as the Director of the Division of Risk 
Management Supervision, so that gives you a heavy dose of 
background in managing risk. Would that be a good description?
    Ms. Thompson. That would be a good description.
    Mr. Hill. And back in September of 2020, you were Deputy 
Director of FHFA's Division of Housing Mission and Goals, and 
that is what you were doing in 2020, right?
    Ms. Thompson. That is correct.
    Mr. Hill. And you attended the FSOC meeting that was held 
on September 25, 2020, where the Council unanimously voted on a 
public statement regarding the secondary mortgage market. Is 
that accurate?
    Ms. Thompson. That is accurate.
    Mr. Hill. I have that statement, and I would ask unanimous 
consent to insert it in the record, Madam Chairwoman.
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. Hill. I thank the Chair. This statement highlighted the 
central role that the Enterprises continue to play in the 
housing markets. And it also described how any distress at 
Fannie and Freddie could pose a financial stability risk unless 
that risk was mitigated by the new FHFA capital rule, and you 
voted to support that FSOC report?
    Ms. Thompson. I was the Deputy. My principals supported it.
    Mr. Hill. Yes. Very good. If you had been the principal, 
would you have supported it?
    Ms. Thompson. It's hard to say. At the time, that was a 
proposed rule that the FSOC wrote the statement on, and there 
were lots of questions about credit risk transfer. There were a 
number of comments, and I think that, as we have spoken about 
earlier, the Credit Risk Transfer Program is very important. 
The statement was issued in September, but the rule was 
finalized in December, so I am not sure.
    Mr. Hill. Okay. Looking back at that, there was a real 
effort to allow the two GSEs to gather capital and become 
stronger, not with any issue, that they would immediately be 
eligible for release from conservatorship. You supported 
building the capital with Fannie Mae and Freddie Mac?
    Ms. Thompson. I still do, yes.
    Mr. Hill. Yes. Can you explain why you cut the capital 
ratio from 4 percent to 3 percent?
    Ms. Thompson. We issued through notice and comment a rule 
to make the leverage ratio buffer a dynamic buffer instead of a 
static buffer. This was something that the bank regulators did 
as well. One of the concerns that was raised was that the 
leverage ratio was becoming a binding constraint. And we have a 
risk-based capital rule as well that takes a look at the risk 
characteristics of the loans versus the leverage, which you 
well know. And so we wanted to make sure that the leverage 
ratio served as a credible backstop for the risk-based 
capital--
    Mr. Hill. Let me reclaim my time. Thank you. I think you 
have explained that well. And when you look at the risk-based 
situation, clearly doing a stress test is an important part of 
that, right? What was CPI inflation in June? Do you know what 
that was: 9.1 percent. Do you agree with that?
    Ms. Thompson. 9.1 percent.
    Mr. Hill. That was high, right?
    Ms. Thompson. It was very high.
    Mr. Hill. Your stress test implies that inflation will be 
1.5 percent between 2022 and 2025. In your worst-case scenario, 
do you think that seems low?
    Ms. Thompson. We haven't released our stress test scenario 
for this year, and we get our assumptions from the Federal 
Reserve like the other regulators, so we will be releasing that 
information in August of this year, the stress tests for both.
    Mr. Hill. I hope that stress test will reflect the 
inflationary environment we are in and also the potential for a 
recession. I am glad to know that it will be out in August. You 
didn't mention in your prepared remarks about your pending 
products and activities rule and when we can expect that.
    Ms. Thompson. Sure. We have been working on finalizing that 
rule for awhile now. And the issue that we are looking at is, 
how do we marry the rule with our current conservatorship 
authorities as we look towards working that out? We will 
finalize the rule.
    Mr. Hill. This year?
    Ms. Thompson. In the near term.
    Mr. Hill. Okay. It seems to me in looking at your pilot 
transparency framework, and your equitable housing finance 
goals, those are in conflict with not having that product and 
services rule. I think it is putting the cart before the horse. 
That rule should be in place, and then those agencies can 
comply with those other policies with it.
    And, Madam Chairwoman, I would ask unanimous consent to 
insert in the record a letter that Senator Tillis and Senator 
Toomey sent to Director Thompson, dated July 19th.
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. Hill. I thank the Chair, and I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from Ohio, 
Mrs. Beatty, who is also the Chair of our Subcommittee on 
Diversity and Inclusion, is now recognized for 5 minutes.
    Mrs. Beatty. Thank you, Chairwoman Waters, and thank you to 
Director Thompson for appearing before the committee today. Let 
me say at the onset that it is great to have an experienced and 
competent leader at the head of FHFA, especially at this very 
critical time in the housing market.
    I represent Columbus, Ohio, and the surrounding areas, and 
housing affordability is one of the most-pressing issues facing 
my district. Unlike practically all of the other Midwestern 
cities, Columbus is growing. Between the 2010 and 2020 Census, 
the population of the Columbus Metropolitan Area grew by 
236,000 people, which is 9 times more than the entire rest of 
the State of Ohio. And we are very fortunate that with Intel's 
incredible multi-billion-dollar investment in semiconductor 
manufacturing in the area, the growth is only going to 
accelerate in the next decade. This is a great position to be 
in, but that growth has put a huge strain on the availability 
of housing, especially affordable housing.
    We know what the National Low Income Housing Coalition has 
said for our area, that there are only 32 available affordable 
housing units for every 100 households. That leaves us 
basically about 50,000 units short. So, I am very grateful for 
all that you have been saying to help us work on this, although 
I know you don't do housing and you don't originate home loans, 
but I am very impressed that you said in your testimony that 
you are exploring the policies and programs to address the high 
cost of housing.
    But here is my first question. Everybody knows I am the 
Chair of the Diversity and Inclusion Subcommittee, and I have 
been on the record asking every one of your colleagues if you 
are aware of the Office of Minority and Women Inclusion (OMWI), 
and what that means, and if you have an OMWI Director?
    Ms. Thompson. Yes, we are very aware of OMWI, and we do 
have an OMWI Director who reports directly to me.
    Mrs. Beatty. Okay. Thank you for that. You would be 
surprised at how many have not answered that question. Director 
Thompson, I also understand that FHFA announced that Fannie and 
Freddie contributed some $740 million into the Housing Trust 
Fund, and that, as I recall, is about a $29-million increase 
over last year. And we welcome that news because, as you know, 
the Housing Trust Fund is an important tool to produce and 
preserve affordable housing for low-income households. But the 
fact is, even with this increase, the Housing Trust Fund falls 
a little bit short of what we need in it. Can you speak to what 
impact it would have if perhaps, we were able to double the 
size of the Housing Trust Fund?
    Ms. Thompson. Sure. Thank you. The Housing Trust Fund, the 
allocation that Fannie Mae and Freddie Mac make to both the 
Housing Trust Fund and the Capital Magnet Fund is through 
statutory formulas, and certainly, it is based on acquisitions. 
We had a record contribution last year because Fannie and 
Freddie had record acquisitions, and so depending on the number 
of loans they purchase, that will determine how much is 
contributed. The Housing Trust Fund is very important because 
we send the money to HUD, and they distribute it to the States, 
who have a good understanding of the specific needs in their 
respective areas. And so, those allocations are very important. 
The money to the Capital Magnet Fund goes to the Community 
Development Financial Institutions (CDFIs), and they, too, can 
distribute money as appropriate to their local areas, but the 
Housing Trust Fund and the Capital Magnet Fund are very 
important for impacting local housing supply.
    Mrs. Beatty. I am very glad you said that in front of my 
colleagues, because I have a bill that I am going to 
reintroduce, called the Generating Resources and Opportunities 
Within (GROW) Act, which will allow us to increase the 
contributions of Fannie Mae and Freddie Mac into the Housing 
Trust Fund and the Capital Magnet Fund. I think I have a few 
seconds left, and with that, is there anything else, if I yield 
my time to you, that you would like to say to us about your 
leadership or anything that you have been doing?
    Ms. Thompson. Sure. Thank you for the opportunity. And, 
again, I really just want to reiterate that both safety and 
soundness, and sustainable access to credit are very important 
to me, and I take my position very seriously. We have a huge 
responsibility. We have public confidence. And I have actually 
worked at FDIC and at FHFA, and I have had an impact and a 
chance to see what happens when public confidence is destroyed. 
I take this role very seriously and I just want to make sure 
that we are marching down the path of safety and soundness, 
good financial condition, and also equitable access to credit 
throughout the country.
    Mrs. Beatty. Let me just say, thank you. And Madam 
Chairwoman, let me also say for the record, many other former 
Directors have probably done a great job, but they have not 
reached out as Director Thompson has. I want to be on the 
record and thank you for reaching out, for talking about 
housing far beyond the traditional means of coming before this 
committee, and I have had the opportunity to have some one-on-
one time with you. Thank you, and I yield back.
    Chairwoman Waters. Thank you. The gentleman from Tennessee, 
Mr. Rose, is now recognized for 5 minutes.
    Mr. Rose. Thank you, Chairwoman Waters, and Ranking Member 
McHenry, for holding the hearing, and thank you to Director 
Thompson for being with us today.
    I would just like to first express some concerns about the 
proposals that are attached to this legislative hearing today. 
We are over $30 trillion in debt. We are experiencing the 
highest inflation in over 40 years, and the Majority has chosen 
to attach proposals, like Build Back Better, and the 
Downpayment Toward Equity Act, to this hearing that would spend 
money we don't have, put people in houses they can't afford, 
and exacerbate the current inflation that is hurting everyday 
Americans, including Tennesseans back in my home district.
    With that, let me dive right into some questions. Director 
Thompson, during your confirmation hearing before the Senate 
Banking Committee, you stated that you, ``have long believed 
that safety and soundness and access to credit are not mutually 
exclusive.'' While some actions that the FHFA takes may promote 
either safety and soundness or access to credit, there are 
actions that FHFA can take and prioritize that enhance both 
safety and soundness and access to credit, such as utilizing 
direct mortgage insurance. Will you commit to prioritizing 
initiatives at FHFA that will both enhance safety and soundness 
and improve access to credit?
    Ms. Thompson. Absolutely. Thank you for the question, 
because that is really something I firmly believe in, and/both 
safety and soundness and equitable access to credit, not 
either/or. And, again, we have seen the extremes on both ends, 
and they have to work hand-in-hand because the Enterprises have 
to do things in a safe and sound manner, but they have to 
fulfill their mission to promote equitable access across the 
country to every neighborhood so that we have a good functional 
housing finance system.
    Mr. Rose. What about direct mortgage insurance? Would you 
speak to that?
    Ms. Thompson. That was, I think, a pilot that the 
Enterprises engaged in a couple of years ago. I would have to 
take a look at what the results were, and probably get input 
from stakeholders on the impact of that particular pilot.
    Mr. Rose. Thank you. Director Thompson, I would like to 
follow up on some of the questioning that you have already 
faced regarding the GSEs. Do you believe that the 
conservatorships are unsustainable and need to end?
    Ms. Thompson. The Enterprises have been in conservatorship 
for 14 years, so I think that nobody ever expected that to be 
the case. I know, again, at the FDIC, when an institution is 
placed into conservatorship, it is placed into conservatorship 
for a resolution, which is sale or some other mechanism. This 
is really unprecedented what we have had to deal with for these 
past years, and this isn't something that there is an easy 
answer to. So, when the Congress makes a decision on the future 
of the secondary mortgage market, we certainly can do whatever 
we can to facilitate that, and we can try to be helpful to the 
extent that you all want to engage in legislative proposals. 
But, again, I am the sixth Director, and have worked under four 
Administrations, and we are happy to engage on this issue 
whenever you all would like.
    Mr. Rose. Thank you. Do you believe that any government 
guarantee should be paid for and should come behind significant 
private capital in the first loss position, kicking in only in 
the most catastrophic of economic crises?
    Ms. Thompson. Yes. I believe that is one of the reasons 
that we are allowing the Enterprises to build capital so that 
the government doesn't have to absorb any of the losses. As 
another reason, we are facilitating the Credit Risk Transfer 
Program, again, so that the private sector, not the Enterprises 
and not the taxpayers, can absorb any catastrophic or 
unexpected losses. We do believe in having skin in the game.
    Mr. Rose. And I think you have sort of alluded to this, but 
are you going to make it a priority during your time to end the 
conservatorships?
    Ms. Thompson. I am going to make it a priority to make sure 
that the Enterprises are run as responsibly as they can be from 
an operational and financial perspective. Again, ending 
conservatorships is not a quick action to undertake. There are 
capital targets that have to be met. There are other policy 
issues that have to be decided by different stakeholders, 
Treasury, some with the Federal Reserve and others. So, it is 
not an easy or immediate process, and we will do our best to 
make sure that when they do exit, they are in a good position 
both financially and operationally.
    Mr. Rose. And in the last seconds that I have here, I want 
to just renew a statement that I made to your predecessor, 
which is that back in my home State of Tennessee, a lot of 
folks are still very concerned about compensation at the GSEs, 
particularly before that 2008 crisis. And if the taxpayer is 
going to be on the hook, we certainly want to be sensitive to 
that. Thank you.
    Chairwoman Waters. Thank you. The gentleman from Florida, 
Mr. Lawson, is now recognized for 5 minutes.
    Mr. Lawson. Thank you, Madam Chairwoman, and Ranking Member 
McHenry. Director Thompson, congratulations and welcome to the 
committee. In terms of closing the racial wealth gap, where 
does FHFA stand on creating power programs that will allow the 
Government-Sponsored Enterprises to purchase more non-
conforming loans for community development financial 
institutions?
    Ms. Thompson. Thank you for the question. FHFA required the 
Enterprises, Fannie Mae and Freddie Mac, to submit equitable 
housing plans that looked at what are the barriers to 
homeownership, and what are some things that they could put in 
place to address those barriers. Again, there are creditworthy 
borrowers across the country who are not able to get homes, and 
some people don't even believe that they can have a home. I 
spoke earlier about one of the programs that both Enterprises 
have undertaken, which is to include positive rental payments 
in the calculation of the underwriting score, and that is a 
program that can be implemented across the country. But we 
believe that people have paid their mortgages and they pay 
their rent.
    Rental payment is one of the largest payments that people 
make every month. And if you have someone who is paying their 
rent on time, that certainly speaks to their ability and 
willingness to repay, and that ought to be considered in the 
credit score calculation and certainly can help responsible 
homeownership.
    Mr. Lawson. Okay. That is great. And, Director Thompson, 
since you mentioned rental assistance, renters who are working 
hard and trying to save up enough for a down payment to 
purchase a home seem to be working against a moving target with 
strong year-over-year increases in home prices and rental costs 
as well as increases in interest rates. What more do you think 
the Enterprises can do to ensure that those who are looking to 
transition from rentals to owning a home are not left behind 
and locked out of the dream of homeownership?
    Ms. Thompson. Both Enterprises have first-time homebuyer 
programs, I think, working with different stakeholders around 
the country to make sure that prospective homebuyers are aware 
of these programs, that they are aware of the requirements, and 
that they are ready for homeownership. We believe that there is 
a lot of information out there about the Enterprises and their 
programs to promote responsible access to credit, and just 
working with other stakeholders to make sure that information 
is available so that we can get creditworthy borrowers into 
homes.
    Mr. Lawson. Director, climate change poses an increased 
threat to the housing financial system. And I heard you allude 
to it earlier that FHFA does have to confirm these changes, the 
challenges that they have with these climate changes.
    Ms. Thompson. That's a great question. From a housing 
perspective, we think of climate change from the natural 
disaster perspective. We look at wildfires and the impact of 
hurricanes and floods, and we want to make sure that the 
Enterprises are well-positioned to address these issues as they 
come up. For example, if a hurricane or a tornado takes place 
and there is a stated national disaster, homeowners are 
impacted immediately. The last thing they need to worry about 
is whether or not they are going to make their mortgage payment 
when they are looking for an alternative place to live.
    So, making sure that we have good programs in place to help 
borrowers in their time of need, I think is very important. And 
as we are seeing more and more of these climate issues take 
place, making sure that people know that they don't have to 
worry about making their mortgage while they are actually 
trying to find adequate housing for their families. So, having 
forbearance programs and modification programs in place, we 
believe is really important.
    Mr. Lawson. Okay. Thank you very much. Madam Chairwoman, I 
yield back.
    Chairwoman Waters. Thank you very much. The committee will 
take a 15-minute recess and resume at 12:16 p.m..
    The committee stands in recess.
    [recess]
    Chairwoman Waters. The committee will come to order.
    The gentleman from Ohio, Mr. Davidson, is now recognized 
for 5 minutes.
    Mr. Davidson. Thank you, Madam Chairwoman. Director 
Thompson, thanks for your time here today. And thanks for the 
work you are doing to make owning a home more feasible for more 
families around our country. We have had a lot of approaches 
here and within the committee, and I don't think it will 
surprise anyone that we have differences of opinion on how to 
solve a problem. The good news is that this is one in which we 
share a common objective. We think America is better and the 
American Dream is more complete when more people own their 
homes. And I just want to run through a couple of scenarios 
here that are ways to maybe go about that.
    Hypothetically, if all borrowers were given a fixed sum of 
government grant money to purchase a new home, would the market 
respond by simply increasing home prices by the same amount?
    Ms. Thompson. It is hard to tell the answer to that 
question, and I don't know that the market will respond by 
increase. I don't know how the market will respond, honestly.
    Mr. Davidson. I think economists would recognize that if 
you have an artificial insertion of, say, whether it is 
$10,000, $50,000, or $100,000, setting that aside, say my 
colleague, Mr. Loudermilk, he is going to sell a home and I 
will buy it, and we said, all right, $250,000, done. Great. 
Make it $300,000. What do you mean? We just shook on $250,000. 
Oh, we are going to get $50,000 from the Federal Government. 
That is effectively how subsidies work, and the things that we 
subsidize tend to be more inflated. We subsidized health care, 
most egregiously, and we have seen the problems of subsidies in 
education. And what is gone is the rate of inflation, and the 
things that we subsidize far outpace the massive inflation we 
have seen in the United States.
    And, frankly, I have been really concerned because the 
Federal Reserve created this artificial subsidy for housing for 
a long time, and they were soaking up Treasuries that no one 
else was willing to buy massively, but they were also buying 
about $40 billion worth of mortgage-backed securities every 
month. That is not a direct subsidy, but it is an indirect 
subsidy. How will FHFA adapt and how will the market respond to 
the fact that the Federal Reserve is no longer soaking up $40-
billion worth of demand for these every month?
    Ms. Thompson. I think the Federal Reserve made a comment 
about what actions they were going to take, and part of those 
actions was to let some of the mortgage-backed securities run 
off, and we have seen some of that take place. When we looked 
at the actual coupons of what Federal Reserve Bank holdings 
were, I think they were looking at coupons or interest rates, 
securities with interest rates of like 2 and 2.5 percent, and 
in today's interest rate, our current coupon is about 4, 4.5 
percent. So, we think that the Federal Reserve's actions 
certainly have started, and it has yet to be seen what impact 
they will have, but so far we have not seen a significant 
change.
    Mr. Davidson. You are doubling the cost of interest rates 
on homes, so the rate of interest is going to go up. We are 
seeing the market respond to that already. And fundamentally, 
that depresses prices, because for the same amount of money per 
month, someone who was going to buy a $250,000 home might have 
to look at a $200,000 home now because they can't afford the 
payment. The interest gets much more expensive, and that has 
the effect of depressing prices. Conversely, when they were 
subsidizing, it had the effect of inflating prices. We have 
experienced this asset price inflation for nearly 2 years with 
the Fed dumping fuel on the fire. I think one of the hopes, 
really, is technology.
    We could all continue to have these debates about 
continuing, hopefully, to turn off some of the economic 
distortions that we are seeing here. It is trending the right 
way at the Fed. Hopefully soon, there will be an election that 
will help turn the trend the right way here in Congress.
    But your office, I was encouraged to see, announced an 
Office of Financial Technology. In this paragraph, I just 
wanted to say, in the announcement, in preparation for the 
launch of the Office of Financial Technology, FHFA conducted 
discussions with peer regulatory agencies and industry groups. 
A key takeaway from those discussions is the value of 
consistent stakeholder engagement and helping to identify 
opportunities and challenges in the application of new 
technologies in the housing finance system.
    Do you go about that approach with clear regulatory 
guidance or regulation by enforcement? And what are some of the 
things that you view as promising as you are launching this 
Office?
    Ms. Thompson. Sure. It depends on the issue, which would 
determine, as it is true with the banking regulators, was 
implemented through guidance and what is implemented through 
statutory regulation. But as we engage with the other 
regulators, and we certainly do with the FFIEC and also with 
FSOC, but each of the regulators has started an office of 
financial technology or something similar.
    One of the things we wanted to do was try to figure out 
what lessons they have learned before we started our office, 
and specifically, we want to focus on technology impacts in the 
mortgage industry. And we want to see the technology that is 
being used, and how it is being used, to make sure that it is a 
safe and sound process, not just for the user of the 
technology, but for the borrower as well.
    Mr. Davidson. Thank you. My time has expired, and I look 
forward to cooperating with you as you develop that office. 
Thanks.
    Chairwoman Waters. The gentleman from New Jersey, Mr. 
Gottheimer, who is also the Vice Chair of our Subcommittee on 
National Security, International Development and Monetary 
Policy, is now recognized for 5 minutes.
    Mr. Gottheimer. Thank you, Madam Chairwoman, and thank you, 
Director, for being here today. The United States is suffering 
from a chronic housing shortage, as we know, and I believe it 
is well past time to implement a long-term national strategy to 
expand our housing supply. The first step of developing a 
sustainable and abundant supply of housing, of course, is to 
reduce the cost of materials and increase access to labor. To 
do this, Congress will take immediate action to fix our supply 
chains and strengthen our workforce by, among other actions, 
investing in skilled and construction trades.
    Director Thompson, from your perspective, what is the 
greatest obstacle to increasing the supply of housing in the 
United States, and what actions could Congress take to most 
quickly reduce housing costs for Americans?
    Ms. Thompson. That's a great question, and certainly, the 
housing supply shortage is not new, and it is getting 
exacerbated, as you stated, through the labor shortage, labor 
costs, and supply chain issues. And to the extent there are 
answers to address those particular issues, I think that can be 
very helpful in terms of just addressing the housing supply. If 
you have the supplies and the supply chain is distorted and 
taking a long time, that has a huge impact on home builders, 
and it is just a domino effect. So to the extent that Congress 
has ideas about things that they want to do, certainly we would 
work with them to figure out what would work for our regulated 
entities in a way that would be helpful.
    Mr. Gottheimer. And are there policies that FHFA is 
pursuing to increase the supply of affordable housing in the 
United States?
    Ms. Thompson. FHFA indirectly impacts affordable housing 
and housing specifically. We don't build. We are, as you well 
know, providers of secondary market liquidity, and we can 
incrementally impact housing. For example, we have allowed the 
Enterprises to allocate low-income tax credit or the housing 
tax credit in rural and other properties as specifically 
focused on affordable housing. We have also encouraged the 
Enterprises to take a look at their existing Accessory Dwelling 
Unit (ADU) programs, and also manufactured housing programs, 
which we think will be very beneficial in terms of helping the 
housing supply in rural areas where housing supply issues are 
particularly acute.
    And again, we are happy to work with the Congress to do 
whatever we can to be helpful as we, as a nation, address the 
housing supply issue.
    Mr. Gottheimer. Thank you, Director. Now, I would like to 
shift focus to the ongoing credit score evaluation, which has 
now been in progress for more than 7 years. Over the past 4 
years, I joined my colleagues in sending letters to three 
different FHFA Directors, including you, about my concerns with 
the proposed multi-score option where the credit bureaus own 
one of the credit score developers, VantageScore. The credit 
bureaus already control the credit data that would be needed by 
any credit score developer to produce a score for this unique 
market. As a result, I don't see how creating a multi-score 
system, which strengthens the credit bureaus' market position, 
is a viable consideration.
    I appreciate your recent response to my letter raising 
these concerns, but I am requesting further elaboration, 
please, on how the so-called lender choice option could address 
the vertical integration threats, consumer confusion, and a 
host of other problems that arise from this approach.
    Ms. Thompson. Sure. Thank you for the question. We have not 
made a decision on the credit score model. As you know, both 
Enterprises and most mortgage participants have used the FICO 
classic model for over 20 years now. And there have been so 
many different changes and things that should impact credit 
scoring, like utility payments or rental payments. And there 
are just a host of other issues that are now more prevalent 
than they were 20 years ago. In fact I don't even think they 
existed 20 years ago.
    But at the end of the day, making a change on updating the 
credit score model is a decision that we take very seriously 
because it is going to have significant operational and cost 
impacts, even if we move from one credit score to a new credit 
score. So, we want to be very thoughtful, and we want to engage 
with all of the stakeholders about not just what we do, but how 
we do it, because it is going to be very costly. Many people 
think that the credit score models--
    Mr. Gottheimer. I'm sorry. I want to try to get a sense of 
your timing in that, when you expect a decision. Do you have a 
sense of timing of it coming, because it has been 7 years? Do 
you have a sense of whether that will be soon?
    Ms. Thompson. Yes. We are in the process. This isn't an 
easy decision, and we want to make sure that we are making the 
right decision because it impacts so many stakeholders 
throughout the nation.
    Mr. Gottheimer. Yes. I just worry a lot because we know 
that is going to take another 2 years once it is decided. I 
just worry a lot about the impact it is having on homeowners 
and families. So, anything you can do to keep us abreast of 
kind of that progress would be very helpful.
    Ms. Thompson. I am happy to do so. Thank you.
    Mr. Gottheimer. Thank you so much, and I yield back.
    Chairwoman Waters. Thank you. The gentleman from Georgia, 
Mr. Loudermilk, is now recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Madam Chairwoman. Director 
Thompson, congratulations on your position. And it is a very 
important time, a very tenuous time that we are in right now, 
where we are focused on the safety and the soundness of the 
GSEs, and I hope you would agree with that. And I want to talk 
a little bit about some priorities of your office, and, first, 
let me ask, where are you on finalizing the rule for prior 
approval of Enterprise products as the law requires?
    Ms. Thompson. Sure. That's a great question. We are in the 
process of looking at finalizing that rule. We want to make 
sure that there is transparency in the activities of the 
Enterprises, and we are looking at a couple of different 
aspects. So, we will be finalizing the rule.
    Mr. Loudermilk. You are going to finalize the rule as it is 
written by law?
    Ms. Thompson. Yes.
    Mr. Loudermilk. Okay. I just want to make sure, because my 
understanding is you may be replacing it with a pilot 
transparency framework.
    Ms. Thompson. No, no, the pilot transparency framework--
just to be clear, there were a lot of questions about what the 
Enterprises were doing in both their duty to serve plans and 
also the equitable homeownership or the equitable housing 
plans. And we wanted to have a framework in place to be 
transparent about what activities the Enterprises were 
undertaking so that people could comment or so you would just 
know what they were doing. And that was just one step that we 
were undertaking, because these pilot programs, some of them 
are included, and we want to have a transparent process where 
people know what the Enterprises are doing.
    Mr. Loudermilk. So, your pilot transparency framework is 
not going to replace the rule. And you are still going to 
require public comment?
    Ms. Thompson. We have a proposed rule, and we received 
public comment on the proposed rule. We are taking those 
comments into consideration, and we are going to finalize the 
rule based on the comments that we received. The pilot 
transparency does not take the place of the rule.
    Mr. Loudermilk. Okay. And that is why I am asking 
questions, because there are perceptions, and in politics, 
perceptions can be reality, so I just want to make sure we are 
in the right place on priorities. And let me first say that I 
agree, and I think everyone on this committee, in Congress, 
agrees that there should be equity in all that we do, 
regardless of someone's background, someone's race, et cetera, 
and I applaud those who look at that to ensure that things are 
equitable. But there have been some issues that we have seen 
here in Congress that when you base a policy specifically on 
race, that is unconstitutional. We have seen that happen 
recently.
    And I just want to make sure that the racial equity plans 
that we come forward with are based on the Constitution. Our 
concern is that Fannie Mae's recent racial equity plan never 
mentions, ``safety and soundness,'' and Freddie Mac's plan only 
mentions it twice. And the fact that some of these are race-
based is generally unconstitutional, which we saw on the 
American Rescue Plan when a race-based priority was given to 
government subsidies and the courts ruled that is 
unconstitutional and struck it down. I just want to make sure 
that when you are going forward, you are working within the 
framework of the Constitution.
    Ms. Thompson. Yes, absolutely, and thank you for the 
question, because I can assure this committee that we fully 
intend to comply with the law as written. And the equitable 
housing plans are certainly plans that are focused on 
underserved communities, similar to the plans that we have for 
rural communities which are underserved, and tribal 
communities. We are focused on communities of color because 
they have been impacted by the housing crisis of the Great 
Recession and even prior to that, and so the things that are in 
some of these equitable housing plans will benefit all. I had 
mentioned earlier the positive rental payments. That would be 
appropriate for all borrowers, all prospective borrowers.
    Mr. Loudermilk. Okay. I only have a few seconds left, and 
you mentioned the 2008 recession. That was brought on because, 
really, we were subsidizing people to buy houses they could not 
afford, right? Right now, we are in a situation where the 
demand is outpacing supply. How do you reconcile that the 
Treasury Department is raising interest rates to suppress 
demand as we are trying to get inflation under control, but the 
GSEs are trying to artificially stimulate through homebuyers' 
subsidies? Is that not contradictory here?
    Ms. Thompson. I'm a safety and soundness regulator first 
and foremost, and everything that the GSEs will do will be 
grounded in safety and soundness, and that includes access to 
credit. We have already seen what happens when unsustainable 
loans were made, and people had loans that they didn't 
understand and couldn't afford. We are not doing that. We want 
to make sure that access to credit is sustainable, that not 
only do people get in homes, but hey stay there, because it is 
completely disruptive for borrowers, servicers, you name it, an 
unsustainable system.
    Mr. Loudermilk. Thank you, Madam Chairwoman.
    Chairwoman Waters. The gentleman's time has expired. The 
gentlewoman from Iowa, Mrs. Axne, who is also the Vice Chair of 
our Subcommittee on Housing, Community Development, and 
Insurance, is now recognized for 5 minutes.
    Mrs. Axne. Thank you, Madam Chairwoman, and thank you, 
Director Thompson, for being here. I very much appreciate it. 
And I sure appreciate hearing the word, ``rural,'' in the last 
5 minutes, I think 3 times, so thank you and your team for all 
that you are doing for rural housing as well.
    Just over 3 years ago, some of my constituents living in a 
manufactured housing community--which, as you mentioned, are 
good opportunities for getting people into homes--in Waukee, 
Iowa, received a notice that their community had been sold, and 
that their rents were set to be jacked up by 69 percent. Many 
of these folks are people who are living on fixed incomes. They 
are, of course, now struggling to afford food and keep a roof 
over their heads. But to make matters even worse, that 
community, just like hundreds of other communities like theirs 
across the country, saw rent and fee increases, and the buyer 
was backed by Fannie Mae.
    So, having these kinds of predatory rent increases 
benefiting from Federal backing just seems so wrong. It is like 
adding insult to injury. And a few years ago, FHFA, Fannie Mae, 
and Freddie Mac worked on a set of tenant site lease 
protections (TSLPs). These are very basic things, as you well 
know, like notice of sale, or closure of a community, or the 
right to sell your own home in your community. But here is the 
problem. That community that I just talked about with a more 
than 60-percent increase in rent, that purchase included those 
TSLPs, and the buyer actually got a discount to buy that 
community, but he is still jacking up their rent increases by 
60 percent.
    I have to ask you, Director Thompson, does it feel like the 
residents in that community are really getting protected?
    Ms. Thompson. Great question. We believe that tenant 
protections are very important, and that is why we require both 
Fannie and Freddie to not purchase loans, especially in 
manufactured housing communities that don't have the tenant 
protections, and they won't get the duty to serve credit. I 
think we need to follow up on that specific example of what 
took place there because that is not the intent. In addition to 
putting these protections in place, one of the things that we 
do is we have the seller or the seller of the loan to Fannie or 
Freddie certify every year that these protections are being 
enforced. I really would like to follow up with you on that 
specific incident.
    Mrs. Axne. Absolutely, and I appreciate that because we 
have to make sure that we take care of this, so thank you. Now, 
can you explain quickly what the duty-to-serve obligations are 
and whether you think this purchase counts towards that 
requirement?
    Ms. Thompson. In order to meet the duty-to-serve 
requirement to get credit from our Agency for Fannie and 
Freddie, they have to have the tenant protections, and we ask 
the Enterprises to put forth a plan as to how they are going to 
increase liquidity in hard-to-serve areas, rural areas in 
particular. The duty to serve covers three specific areas: 
rural; manufactured housing; and affordable housing 
preservation. They submit their plans, and then we review them 
and approve them, and they have to meet those plans and then 
they get credit, and we assess their progress on an annual 
basis: Here is what you said you were going to do, and here is 
what you did. Did you do it, and if you didn't, there are lots 
of conversations.
    Mrs. Axne. Good. Thank you. So, it definitely does count. 
And I believe this kind of action should not be counting as 
community here, and I would ask you to look at those changes, 
so thank you for bringing that up that your team will because 
it is really important. And I have to tell you, it is 
incredibly frustrating for me and my constituents who feel like 
they are being put under the thumb of a landlord who is taking 
advantage of Federal backing and not putting forth the 
protections that my constituents need. These are just average, 
everyday folks trying to make ends meet, save enough for a 
dignified retirement, and keep a good roof over their heads.
    In general, I would love to see you and the FHFA strengthen 
the protections for residents of communities that Fannie and 
Freddie finance, require public disclosure of those 
communities, align duty-to-serve credit with the actual level 
of support for the residents, and work to give residents a 
strong right of first refusal to give them a chance to buy 
their own communities. You may know I have been working with 
Senator Hickenlooper on this. We have a letter that gives more 
detail on those recommendations, so we will be getting that to 
you. And can I just have you commit to reviewing that letter 
and taking a look at some of these protections for manufactured 
housing?
    Ms. Thompson. Absolutely. We are happy to do so.
    Mrs. Axne. Thank you so much. I will make sure the Senator 
knows about that. My team and myself are ready to work with you 
and your team at any given point in time. I agree with you. I 
think manufactured housing could be much more impactful in 
helping get a roof over people's heads in this country, but 
only if the protections are really there for those tenants. 
Thank you so much. I yield back.
    Chairwoman Waters. Thank you. The gentleman from Ohio, Mr. 
Gonzalez, is now recognized for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman. And 
thank you, Director Thompson, and congratulations, which has 
been extended so many times and is much deserved.
    When I look at the housing market today and really for the 
last several years, I think what we see is a clear supply and 
demand imbalance which is jacking up prices. Of course that 
was, in many ways, stimulated by zero percent interest rates 
which were held too low for too long. That aside, homes are 
becoming more unaffordable, and it is pricing, especially young 
families, out of the market entirely. As you note in your 
testimony, the number-one issue is low inventory. Beyond 
increasing the GSE's equity investment cap, what more can the 
FHFA do to increase supply? For example, could Fannie and 
Freddie take steps to encourage more lenders to make more low-
cost loans available for builders to buy land and construct 
less-expensive starter homes for first-time buyers?
    Ms. Thompson. That's a great question, and we will have to 
take a look at the charter requirements for Fannie and Freddie 
to see if they were eligible to purchase construction or loans 
that had not, without the actual collateral, they have to buy 
the loans on property that exists, not to be. But certainly, we 
would have to look at the charter requirements for Fannie and 
Freddie on that particular issue.
    Mr. Gonzalez of Ohio. Anything else that you could think of 
within your remit that could boost supply?
    Ms. Thompson. Again, as you pointed out, Fannie and Freddie 
have very little impact on supply. Certainly, they can provide 
liquidity for different types of mortgages. And you mentioned 
on the multi-family side, we talked about an increase in the 
LIHTC allocation. On the single-family side, we have really 
been looking again at accessory dwelling units and also the 
manufactured housing. We think, again, that the manufactured 
housing programs that already exist at Fannie and Freddie can 
certainly be helpful in terms of providing liquidity to those 
who want manufactured housing.
    Mr. Gonzalez of Ohio. Yes, thank you. I think that 
highlights a point that Mr. Davidson was moving in the 
direction of, which is the more subsidies we provide, the more 
that we do these sorts of things, we don't actually solve the 
underlying problem, which is the lack of homes, and there 
simply isn't enough supply in the market. This is especially 
acute in the places with the worst homelessness problems 
because it is nearly impossible.
    For example, let's talk about San Francisco for a second, 
where it's nearly impossible to bring homes online. It takes 
forever. It costs ungodly sums, and, as a result, their housing 
crisis is probably as bad as any in the country.
    So, I hope this committee will start to take that issue up 
in a major way. We talk a lot about housing and we should, 
because, as Mr. Davidson suggested, it is a shared priority for 
all of us. But until we do something significant on the supply 
side, I just don't see this solving itself.
    I have a minute and 40 seconds left. So once again, the 
GSEs are growing in power and building up. They are implicitly 
taxpayer-guaranteed debt. As it stands, the combined assets of 
the GSEs are over $7 billion, which is an amount greater than 
the combined assets of the nation's three largest banks. What 
steps is the Agency taking to ensure that in the event of a 
market downturn, low-income buyers will be protected and 
taxpayers won't be required to once again bail out the GSEs?
    Ms. Thompson. That is a great question. The Enterprises, as 
you mentioned, are responsible for a little over $7.5 trillion 
in--
    Mr. Gonzalez of Ohio. Trillion? I said, ``billion.'' It is 
trillion.
    Ms. Thompson. Yes, but your point was well made. Just over 
a year ago, they were allowed to retain all of the earnings 
that they made, and this has been about a year-and-a-half now, 
and between Fannie and Freddie combined, they have about $80 
billion in capital. And in addition to continuing to build 
capital, they are also engaged in the Credit Risk Transfer 
Program, because while they are building capital, we want to 
make sure that if something unexpected happens or if there is a 
catastrophic loss, that we have transferred that credit risk to 
the private sector so that they can absorb some of those losses 
and that those losses are not on the backs of the taxpayers or 
the Enterprises.
    Mr. Gonzalez of Ohio. And how do you feel about that at the 
moment? Do you feel comfortable with the safety and soundness 
of our GSEs at the moment?
    Ms. Thompson. Yes, I feel very comfortable with the safety 
and soundness of the Enterprises. We have outstanding 
supervision programs, great people at FHFA who look at Fannie 
and Freddie every single day. We also actually benefited, to 
some extent, from the portfolio perspective, with the low 
interest rate environment as many borrowers took the 
opportunity to reduce their interest rates. I would consider 
that derisking the existing portfolio, so we are in good 
condition. We are concerned about some of the market volatility 
and some of the rapidity with which these changes have taken 
place, the interest rate increase in home prices, so we keep 
our eye on that.
    Mr. Gonzalez of Ohio. Thank you. I yield back.
    Chairwoman Waters. The gentleman's time has expired. The 
gentleman from Illinois, Mr. Casten, who is also the Vice Chair 
of our Subcommittee on Investor Protection, Entrepreneurship, 
and Capital Markets, is now recognized for 5 minutes.
    Mr. Casten. Thank you, Madam Chairwoman, and Director 
Thompson, it's nice to see you. I have great sympathy for your 
position because I feel like all of us who are responsible in 
some capacity for housing policy are deeply schizophrenic. On 
the one hand, we want houses to be a store of wealth and 
increase the wealth of the American people. On the other hand, 
we want housing to be affordable, and anything we do to push 
one of those levers hurts the other. And I think we have seen 
it a lot on this committee today, right, whether or not we 
think about housing inflation as being a good thing.
    From 2010 to 2020, a period that I think all of us would 
agree was not a particularly inflationary period, we saw median 
wages in the U.S. over that 10-year period grow by only 9 
percent. CPI was up 20 percent during that period, and median 
home prices went up 50 percent. Those are numbers to prove what 
we all know, which is that it has gotten harder and harder for 
most Americans to buy their first home and start accumulating 
that wealth.
    And I had this conversation recently with Larry Summers 
that you can put a part of the blame for that on the fact that 
way back in 1983, we actually took housing prices out of the 
CPI Index. There was a concern that this was going to 
eventually bankrupt Social Security because housing prices were 
going to grow so quickly. And the result of that, in part, has 
been that the Fed does not raise interest rates as quickly to 
rising house prices as they otherwise would have.
    And I wonder if you could comment just, number one, how you 
see your role, how you balance that tension between wealth 
creation and housing affordability? And number two, what would 
you pay if you didn't have a house? Should we think about 
putting housing prices back into CPI so that the Fed can 
actually get out ahead of housing bubbles beforehand?
    Ms. Thompson. It is a great question, and I haven't really 
thought about whether or not we should put housing back into 
CPI. I am certainly happy to work with you and do some research 
on that particular issue and get back to you and your staff on 
that.
    In terms of the balance, we try to balance all of the 
different factors, the market factors, and the other issues 
that pertain to the activities of our regulated entities. And 
there is always a healthy tension, as you mentioned, between 
the home prices and also affordability. And again, our view is 
to make sure that safety and soundness as far as in that we are 
making sure that we are providing liquidity across the country 
to those who are eligible and able to purchase homes.
    And striking that balance, again, is important, because 
sometimes there are factors, as you have mentioned, that we 
just can't or didn't plan for. But, again, we have pretty 
restrictive programs in place that make sure that we are not 
allowing loans to be made that cannot be repaid and that 
borrowers cannot afford. I think that those are really some 
healthy tensions in terms of affordability and the home price.
    Mr. Casten. I would love to continue the conversation. It 
is a tricky issue. But at a minimum, it seems to me that if 
wealth is growing faster than income, that is going to 
disproportionately accrue at the upper ends of our economy, 
which is what we stated.
    Second, unrelated question, I know you have gotten a lot of 
questions about Fannie and Freddie and conservatorship, and I 
understand you are not going to go on the record with what 
might happen there. But it strikes me that you have a fairly 
unique vantage point because you oversee all of these other 
Federal Home Loan Banks (FHLBanks), many of which, unlike 
Fannie and Freddie, don't have this innate conflict because it 
is a federally-backed, for-profit institution. They behaved in 
ways that got them into conservatorship in the first place, 
that you didn't have to deal with, with the other FHLBanks 
because the other FHLBanks structurally don't have a conflict 
between their customers and their homeowners.
    And I wonder if you would consider having a conversation 
that if we are going to eventually get Fannie and Freddie out 
of conservatorship, can we think about learning the lessons 
from the other FHLBanks and maybe changing the structure of 
Fannie and Freddie so that they don't have the incentives to 
get back in, because, again, I think within the banks you 
oversee, it is not coincidental that the one that went into 
conservatorship, that blew up, was the one that had the 
conflict of interest, that, too, would have a conflict of 
interest.
    Ms. Thompson. We are happy to have those conversations.
    Mr. Casten. Okay. I will follow up with your office, and I 
will yield back the balance of my time. Thank you.
    Chairwoman Waters. Thank you. The gentleman from Wisconsin, 
Mr. Steil, is now recognized for 5 minutes.
    Mr. Steil. Thank you very much, Madam Chairwoman. And thank 
you for being here, Director Thompson. I appreciate your time 
with us today as well as your testimony.
    In your testimony, you noted that at the FHFA, you took 
decisive action to support the market and provide relief to 
borrowers and renters with mortgages backed by the Enterprises. 
This is in relation to navigating through the pandemic. And you 
said, ``Our actions allowed millions of Americans to stay in 
their homes.'' That is a great thing for so many Americans. Do 
you believe that during the pandemic, FHFA's response to the 
pandemic fell short?
    Ms. Thompson. I believe that the pandemic was 
unprecedented. And I believe that FHFA and the regulated 
entities worked together to ensure that borrowers were 
protected and stayed in their homes, and also that renters were 
protected as well. And I think that we worked really hard to 
make sure that the losses, because nobody knew what they were, 
would not be exorbitant.
    Mr. Steil. Understood. And I would agree that I think we 
actually navigated through that reasonably well from an FHFA 
perspective, and I appreciate your comments. The reason I bring 
it up is earlier, I know, in a previous statement, going back a 
little bit, our chairwoman said, ``I am very concerned that 
FHFA's response to this pandemic has fallen short, and that 
Director Calabria, like President Trump, is putting his 
personal agenda ahead of the American public.'' I disagree with 
that, and from your words, it sounds like you do as well.
    Let me jump to the next topic I want to cover. I am 
curious, in particular, about the capital requirements, how we 
are building this up, in particular, and how, in your role as 
both a regulator and a conservator, you are analyzing building 
up those capital requirements and what actions are being taken 
under your direction to do that? How do you balance those two 
hats?
    Ms. Thompson. Sure. We have an Office of Conservatorship, 
and we also have an Office of Supervision. And the Office of 
Supervision operates in a similar way to supervision 
responsibilities at other Federal regulatory agencies, so they 
supervise. We have a supervision team for the Enterprises, and 
we have a supervision team for the Home Loan Banks. The Office 
of Conservatorship looks at the infrastructure of the 
Enterprises, and they also work with the Division of Housing 
Mission and Goals, which works on many policy initiatives. We 
have a huge governance infrastructure that evaluates some of 
the policies and practices of the Enterprises, but we have a 
separate team that oversees supervision.
    Mr. Steil. Understood. That is a helpful clarification for 
me. Is it a goal in your role as the Director to continue to 
build capital at the GSEs?
    Ms. Thompson. Absolutely.
    Mr. Steil. Perfect. And I would like to take that in that 
context and ask you a question about a decision you made. Under 
Director Calabria's FHFA, we put a portfolio cap on vacation 
homes and investment properties, which you removed once you 
took over, and I am curious about the justification for that? 
Earlier today, you said you think it is important that we move 
risks to the private sector, and I agree with that. So, how 
would you explain that to a voter in Kenosha, Wisconsin, who is 
concerned that their tax dollars are at risk for the GSEs, and, 
in particular, as it relates to vacation properties and second 
homes?
    Ms. Thompson. I would say that FHFA and Fannie and Freddie 
monitor risk. There is a role for seconds and investors. And in 
many cases, the investor properties are in minority or low- to 
moderate-income communities. That would be true in Kenosha or--
    Mr. Steil. The vacation properties are in low- to moderate-
income areas?
    Ms. Thompson. No, no. Vacation properties might be in Door 
County or other.
    Mr. Steil. If they ever visited Wisconsin, it would be one 
of the most high-income areas in the State, right? There are 
often vacation, private--traditionally, people who have second 
homes are not low-income individuals.
    Ms. Thompson. We just monitor the risks. We monitor what 
comes in for investor properties and second homes. I did not 
remove it. We are monitoring the risk to our conservatorship 
authorities and our supervisory authorities.
    Mr. Steil. I appreciate your comments. Let me just share my 
view on this, which is that I think any time government risk is 
being backed by shareholders, implicitly or explicitly--in this 
case, implicitly--I get really concerned when we are looking at 
fancy-pants vacation homes differently than, in particular, 
low-income individuals, whom we really have to make sure we are 
getting into that home. When we look at expensive homes, I 
think that is a different bucket. I appreciate your time. I 
yield back.
    Chairwoman Waters. Thank you. The gentlewoman from 
Massachusetts, Ms. Pressley, who is also the Vice Chair of our 
Subcommittee on Consumer Protection and Financial Institutions, 
is now recognized for 5 minutes.
    Ms. Pressley. Thank you, Madam Chairwoman. I really 
appreciate your holding this critical hearing, and Director 
Thompson, I appreciate your leadership at the FHFA.
    Blatantly racist policies, like redlining, denied Black 
families homeownership opportunities throughout much of 
America's history, and we are still seeing the effects of those 
laws today. In fact, the WBUR analysis of mortgage lending in 
Boston, a city in my district, the Massachusetts 7th, found 
that between 2015 and 2020, Black applicants were denied 
mortgages at 3 times the rate of White applicants. This is 
modern-day redlining, and we need intentional policy solutions 
and tools to end this discrimination and create equity in our 
housing market.
    Director, every family has the right to a stable, safe, and 
affordable home, but for Black families, this right has truly 
never been actualized. Director Thompson, last December you 
acknowledged that special purpose credit programs are important 
tools that can promote equity. Fannie Mae and Freddie Mac both 
cite these programs as ways to help promote credit access and 
reduce barriers to homeownership for Black and Latino 
borrowers. However, these programs remain dramatically 
underutilized. Can you share with us your plan to ensure the 
special purpose credit programs reach borrowers of color who 
are disproportionately underserved?
    Ms. Thompson. Sure. Thank you for the question. The 
Enterprises, as you have mentioned, have published these 
equitable housing plans, and contained in those plans are 
provisions to utilize the special purpose credit programs. And 
we are making sure that all of the programs and policies that 
are in these equitable housing plans come before the FHFA so 
that we can understand the risk, and we can understand the 
impact, both on low- to moderate-income families and 
communities of color. And we really believe that the SPCPs, or 
the special purpose credit programs, are going to be a really 
good way to facilitate equitable homeownership in a responsible 
way, working with different stakeholders.
    Ms. Pressley. Thank you. And Director Thompson, Fannie Mae 
and Freddie Mac's practice of charging loan-level price 
adjustments disproportionately impacts Black and Brown 
borrowers, due, in part, to limited access to wealth for large 
down payments. These fees are pricing many Black and Brown 
borrowers in my district and around the country out of the 
mortgage market altogether. Will you commit to eliminating 
loan-level price adjustments, and have you considered how this 
change could help struggling homebuyers actually achieve 
equitable access to homeownership?
    Ms. Thompson. Thank you for the question. We have asked 
Fannie Mae and Freddie Mac to undertake a holistic pricing 
review, which would include the loan-level pricing adjustments 
or delivery fees and also the guaranty fees. And we are going 
to look at the submissions and take into consideration the 
impact that pricing has on all of the different segments, 
including communities of color. That is a priority for the 
Enterprises for this year, and we will commit to taking a look 
at, again, the pricing and the impact on different areas of 
impact.
    Ms. Pressley. Thank you. And with the Federal Reserve's 
recent interest rate hikes, homeownership is even further out 
of reach for many working-class families due to the increased 
cost of mortgages, so at least some layer challenges there. 
Director Thompson, what policy options is the FHFA considering 
to offset rising interest rates and assist first-time 
homebuyers who lack intergenerational wealth? Would you agree 
that post-purchase counseling or, say, a reserve account to 
assist borrowers with home repairs and other financial 
hardships will help in that regard?
    Ms. Thompson. I absolutely think that post-purchase 
counseling is extremely helpful, especially when a borrower 
gets in trouble. That was one of the lessons learned from the 
Great Recession, that borrowers were not calling their 
servicers when they were getting in trouble with having to pay 
their mortgages or when they couldn't pay. So, early contact is 
really important, and so we think that is really just 
fundamental.
    The other thing that you mentioned that I think is very 
important is what I call liquidity reserves, or what happens 
when the hot water heater breaks and you have to go into your 
savings. These are the things that really need to be talked 
about as we enter and embark into homeownership because these 
unexpected expenses can certainly have an impact on households. 
And the more information borrowers, especially first-time 
homebuyers and first-generation homebuyers, have is going to be 
just crucial to the sustainability of the mortgage.
    Ms. Pressley. Thank you.
    Chairwoman Waters. Thank you. The gentleman from South 
Carolina, Mr. Timmons, is now recognized for 5 minutes.
    Mr. Timmons. Thank you, Madam Chairwoman, and welcome, 
Director Thompson. Thank you for being here. Are you familiar 
with the intern graduate opportunities that are available at 
the FHFA?
    Ms. Thompson. We have interns at FHFA. I am not sure if 
that is an exact name of the program.
    Mr. Timmons. Sure. I am looking on the website, and you 
have internships for, I guess, college-, and high-school-level 
students. You have a Recent Graduate program, a Presidential 
Management fellow program, and a Research Assistant program, 
with different levels of qualifications, and different pay 
structures, obviously, because some of them have more 
qualifications than others. That makes sense. Have you ever 
been involved with any hiring or recommendations for any of the 
positions I just talked about?
    Ms. Thompson. No, I have not.
    Mr. Timmons. Do you have any idea what they make?
    Ms. Thompson. The High School Interns is a new program. We 
certainly work with the other regulators like the OCC, the SEC, 
and other financial regulators, but I am not sure what the 
exact pay is for those.
    Mr. Timmons. But you would agree it is probably not more 
than $100,000 for any of those positions annually?
    Ms. Thompson. For an internship?
    Mr. Timmons. Yes.
    Ms. Thompson. I have no familiarity with pay scale, and we 
actually work with our other regulators to figure out what our 
pay structure is going to be.
    Mr. Timmons. If they did make over $100,000, do you think 
they should be subject to the ethics and disclosure 
requirements?
    Ms. Thompson. I think everybody should be subject to ethics 
requirements.
    Mr. Timmons. I like that answer. That is very helpful. So, 
you don't have any fellowship programs where you have, say, a 
couple dozen people making a quarter-million dollars a year 
working for you?
    Ms. Thompson. I would have to take a look so I could give 
you an accurate answer.
    Mr. Timmons. Okay. Probably not. Is that right? You would 
know about it if you did.
    Ms. Thompson. I should know about it.
    Mr. Timmons. I guess one last question. Would you allow any 
of your interns or graduate fellows to do interagency 
communications, kind of speak on your behalf in their capacity 
as an intern or a fellow? Probably not?
    Ms. Thompson. I allow my direct reports to speak up. We 
speak on behalf of the Agency.
    Mr. Timmons. Sure. That is fine.
    Ms. Thompson. Yes.
    Mr. Timmons. Okay. As you know, in November of 2015, 
Congress enacted the Equity in Government Compensation Act of 
2015, which capped the compensation that the Chief Executive 
Officer of each GSE can make at the levels in effect at the 
start of 2015, which was $600,000 per year. Then in March of 
2019, FHFA's Inspector General found that the GSEs had fought 
their compliance with that law by creating new executive level 
jobs, ``acting to circumvent the congressionally-intended cap 
of $600,000 on CEO compensation.''
    Housing Subcommittee Ranking Member French Hill sent a 
letter to your predecessor, Director Calabria, about this issue 
in 2019. My question today is, beyond the Chief Executive 
Officers, to whom that law applies, are there any current 
employees at any level of either Fannie Mae or Freddie Mac who 
are currently making more than $600,000 in an annual salary?
    Ms. Thompson. I don't believe so, but I would check with 
the Ks and Qs that are issued by the Enterprises. They do have 
at-risk compensation, but I don't believe that there is any 
individual within Fannie or Freddie who has a base salary of 
more than $600,000.
    Mr. Timmons. Okay. I guess I will give you some homework. 
If there are any, could you tell us how many, and we will 
submit some questions. And then, could you supply a list of 
those positions and their rate of compensation, if anyone does 
exceed $600,000? And we will get you something in writing. It 
is okay. And would you agree that if anybody is making more 
than that while the GSEs remain in taxpayer-supported 
conservatorship, that would be a problem? I guess, to your 
knowledge, there aren't any that make more than $600,000, but 
if there were, would that be a problem?
    Ms. Thompson. I want to be clear that the base salary--they 
can have bonuses--cannot be more than $600,000. They do have 
at-risk compensation, and I, again, would look at the public 
disclosures, and I would also get you the information that you 
wanted on that particular issue.
    Mr. Timmons. Thank you so much. I really appreciate you 
being here today. Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from North 
Carolina, Ms. Adams, is now recognized for 5 minutes.
    Ms. Adams. Thank you, Madam Chairwoman, for hosting the 
hearing today. Director Thompson, thank you for your testimony, 
and congratulations on your confirmation. I am delighted to 
have an HBCU at the helm of FHFA, and I can't wait to see the 
great work that I know you will do.
    Madam Director, I have three questions for you. Director 
Thompson, I would like to dive right into something that we 
both care deeply about, the affordable housing crisis in 
Charlotte and Mecklenburg County, which I represent. We need 
30,000 units of housing to meet our community's need, and that 
is why I proudly introduced the bipartisan, bicameral LIFELINE 
Act with Representative David Rouzer, and Senators Leahy and 
Collins. Our bill would allow cities and States to use their 
already-appropriated Coronavirus State and Local Fiscal 
Recovery Fund (SLFRF) dollars to serve as gap financing for 
housing that utilizes LIHTC.
    Director Thompson, do you believe that enabling local 
governments to use their SLFRF dollars as gap financing for 
LIHTC units could help ameliorate our nationwide housing 
shortage?
    Ms. Thompson. Certainly, I would love to get more 
information on that so I can give you a more thorough and 
thoughtful answer, and I would be happy to work with you on 
this particular issue.
    Ms. Adams. Okay. Thank you. We will make sure you get the 
information. I do know that FHFA has been evaluating a new 
credit score model for a number of years now, so I wanted to 
echo the sentiments that Mr. Gottheimer made earlier.
    Ms. Adams. Director Thompson, can you provide a brief 
update on where the Agency is in that process and give us a 
roadmap on what the next steps might be?
    Ms. Thompson. Sure. Thank you for the question. We have not 
made a decision on the update for the credit score model. We 
are currently analyzing the submissions that we received for 
the modelers that have submitted their applications. The 
Enterprises went through their oversight process, and we are 
now going over ours. And, again, I mentioned earlier that this 
is a very complicated decision, and is very impactful for all 
stakeholders in the mortgage industry. And we want to make sure 
that we get as much stakeholder input on this decision as 
possible, so we are actively engaged in overseeing and 
reviewing the applications that have been submitted.
    Ms. Adams. Thank you. I have one last question. It is my 
understanding that FHFA's Office of Inspector General released 
a report on third- and fourth-party service providers, and FSOC 
recently published a similar report. Can you walk us through 
your safety and soundness concerns if those core providers of 
technology services to the Enterprises were to fail?
    Ms. Thompson. Yes. Thank you for the question, and we have 
asked as an agency for third-party service provider oversight. 
We want to have the same regulatory authorities that the 
financial regulators have, the bank regulators in particular, 
over their regulated entities. And we believe that the persons 
or entities that provide services to our regulated entities, if 
there is an issue that could impact the safety and soundness of 
Fannie Mae and Freddie Mac or the Home Loan Banks, that we want 
to have the authority to go in and take a look and identify 
whatever the problem might be because it could be very 
impactful. And we would like to have those authorities so that 
we can really have parity with the other financial regulators.
    Ms. Adams. Right. Thank you very much. Madam Chairwoman, I 
yield back.
    Chairwoman Waters. The committee stands in recess. We will 
return after the vote on the Floor.
    [recess]
    Mr. Green. [presiding]. The Chair now recognizes Mr. Norman 
for 5 minutes for questions.
    Mr. Norman. Thank you, Chairman Green. I appreciate the 
opportunity. Director Thompson, thank you for taking the time 
to be here today. Let me ask your opinion. Why is it that 
someone can get a taxpayer-backed loan from Fannie or Freddie 
for a second home up to $1 million?
    Ms. Thompson. Sir, thank you for the question. We have a 
statutory requirement for loan limits, and the Enterprises are 
allowed to purchase second homes, investor homes. And as long 
as they meet the qualifications, the loan limits are prescribed 
by statute for the different property types. We certainly would 
be happy to work with the committee on any adjustments they 
would wish to make.
    Mr. Norman. Do you think that would be something that would 
really send a message, for a second home to be able to let the 
taxpayers on the hook to pay it off, if it doesn't work out, 
for a second home up to $1 million? Do you not think that sends 
a message to all Americans that something is not right about 
that?
    Ms. Thompson. Certainly, there are requirements on how many 
second homes, how many investment homes and other property 
types that are different from single-family residential, which 
is the bread and butter of the Enterprises' portfolio. So, we 
do look at the volumes that come in, and we also look at the 
characteristics that come in. With regard to the million 
dollars and the pricing, again, that is a requirement that we 
have to follow the law and impose.
    Mr. Norman. If you could use your influence on that, I 
think that would send a strong message. Secondly, Congressman 
Luetkemeyer's question on affordable housing--that is my line 
of work, I have been doing it for a long time, and I don't know 
what affordable housing is anymore. What is affordable? I would 
not start a project now. You can't get water heaters. You can't 
get pipes to put the utilities in. The supply chain issues on 
top of the inflation is out of control. His question was, have 
you had an audience with the President, and you said you had, 
but does he realize the severity of what he is doing with his 
policies, particularly with gas and energy?
    One thing that would unlock this country would be to go to 
our natural resources and start producing our own oil and gas 
instead of buying it from OPEC, which is 15 countries that 
don't like us. And I can't tell you the number of projects that 
are stopped because truckers try to get somebody with a GDL to 
drive a truck. They can't price anything. They have a shortage 
of workers anyway. Anyway, all of the above, you need to be 
pounding on his desk saying, this is not right, and it is not 
right for the homeowners. As housing goes, so goes the economy. 
Would you agree?
    Ms. Thompson. I would agree that housing is a very 
important component of the economy.
    Mr. Norman. You realize housing, from footings to finished 
product, affects over 142 different trades. That is coming to a 
complete standstill. And I am from South Carolina. We have 
people coming there. I see more California tags, New York tags, 
New Jersey tags that come in because of our low regulations, 
and our low crime rates. And I would ask you, for the sake of 
the citizens of this country, to bang on his desk and say 
something has to be done sooner rather than later.
    Ms. Thompson. Congressman, thank you so much for that 
suggestion.
    Mr. Norman. Now on the GSEs, I heard you earlier going to 
the private sector--and I only have 52 seconds--trying to 
transfer the funds. What kind of discount rate do they normally 
buy these on? They are not going to take risks that they can't 
recover. What is your take on that?
    Ms. Thompson. Actually, Congressman, they have capital 
markets transactions that they sell, and they use a syndicated 
structure, similar to what they do for mortgage-backed 
securities, and they sell based on the market rate that is 
available at that time. And they sell different tranches of 
these securities, and sometimes the spreads are wider than 
others. But many times, some of these transactions are 
oversubscribed, which means that they can tighten the spreads. 
So, we are trying to preserve and conserve the assets of the 
Enterprises for the taxpayers.
    Mr. Norman. Thanks for your service. You are one of the few 
who have a pleasant way. You answer the questions in an easy 
manner, and I appreciate that.
    Ms. Thompson. Thank you.
    Mr. Norman. I yield back, Mr. Chairman.
    Mr. Green. The gentleman yields back.
    I would like to thank our distinguished witness for her 
testimony today, and I would also like to thank her for her 
patience today because we did have votes interrupt our hearing, 
and you have been very gracious. So again, we thank you.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witnesses and to place her responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing is now adjourned.
    [Whereupon, at 2:51 p.m., the hearing was adjourned.]

                            A P P E N D I X



                             July 20, 2022 


		
		
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