Laurie Goodman and Jun Zhu explain the complicated but critical controversy over the Federal Housing Finance Agency's (FHFA) recent policy for sunsets on loan put-backs. At stake: the ongoing constraints on lending in the United States.
Laurie Goodman and Jun Zhu take issue with a report released in September by the Federal Housing Finance Agency’s Inspector General (OIG). The report was critical of a policy enacted in January, 2013, under Acting Director Ed DeMarco, to offer a "sunset" from loan put-backs for lenders with loans in certain situations.
The sunset policy was put in place to help "expand the credit box," according to Goodman and Zhu. But "[the] OIG found the January 2013 implementation of a set of sunset provisions to be flawed." Namely, "that the risks of the 36-month sunset were not sufficiently analyzed, and that the GSEs [Government Sponsored Enterprise, i.e., Fannie Mae and Freddie Mac] adopted the revised standards before putting the needed risk assessment tools in place."
Goodman and Zhu, however, argue that the OIG's report was incomplete in its analysis: "Our analysis of recent, more tailored data, however, reveals that the OIG’s analysis of this sensitive issue is incomplete and overstates the risks of the plan."
FULL STORY: Incomplete OIG report overstates the risks of FHFA sunset plan
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