To Members of Nareit’s mREIT Council and Residential REIT CEOs:

Yesterday, the U.S. Department of the Treasury (Treasury) released its long anticipated Housing Reform Plan (Plan) to address the U.S. housing finance system and incrementally privatize Fannie Mae and Freddie Mac. The Plan, which follows President Trump’s March 27, 2019 Memorandum on Housing Finance, is presented in roughly 50 legislative and administrative reform recommendations, set forth in two separate reports, one issued by Treasury (Treasury Plan) and the other by the Department of Housing and Urban Development (HUD; HUD Plan).

Of particular significance to mREITs, the Treasury Plan includes specific directives to Congress and the Federal Housing Finance Agency (FHFA) to “revisit the FHLBank membership eligibility restrictions to consider whether captive insurers and other types of financial institutions should be eligible for membership.” (Treasury Plan, p. 44). The Treasury Plan also includes the statement below, explaining the Administration’s support for expanding eligibility for FHLB membership:

With the continued evolution of the housing finance system, there might be some question as to whether the current statutory and regulatory restrictions on FHLBank membership continue to be well-tailored to the housing and community development mission of the FHLBanks. The collateral eligible to secure FHLBank advances is already limited by law to mortgage and other assets that generally have a close nexus to the FHLBanks’ mission, such that broader membership eligibility should not necessarily detract from that mission. While there might be unique counterparty or other safety and soundness risks posed by advances to mortgage lenders that are not subject to comprehensive prudential regulation, those risks potentially could be managed through enhanced collateral haircuts, capital requirements, or other counterparty risk management practices (e.g., bankruptcy-remote funding structures). (Treasury Plan, p. 44).

The Plan’s directive to expand eligibility for FHLB membership is followed by two Treasury recommendations, one directed to Congress and the other, which specifically references captive insurance membership, to the FHFA:

  • Congress should consider permitting additional classes of mortgage lenders to become FHLBank members.
  • Pending legislation, FHFA should revisit its rule excluding captive insurance companies from FHLBank membership in light of the continued evolution of the housing finance system. (Treasury Plan, p. 44).

The central elements of the Plan are, of course, the Administration’s legislative and administrative recommendations to shrink the GSE footprint and eventually return Fannie Mae and Freddie Mac to the private sector. Of note, the Plan states that the Administration will leave the current Treasury financial backstop in place during the transition "to ensure stability in the housing finance system.”  With regard to the future of the backstop, the Plan states that “[a]lthough Treasury does not believe a government guarantee is required, Treasury would support legislation that authorizes an explicit, paid-for guarantee backed by the full faith and credit of the Federal Government that is limited to the timely payment of principal and interest on qualifying mortgage-backed securities (MBS)." (Treasury Plan, p. 2).

Other key elements of the Plan related to the wind-down of the GSE conservatorships include:

  • Assisting the GSEs build "capital sufficient to remain viable as …going concern[s] after a severe economic downturn";
  • Lowering the cap on the GSE investments in mortgage-related assets and restricting their retained mortgage portfolios;
  • Initiating a rulemaking process to create new GSE pilot programs and other new activities or products;
  • Directing the CFPB to permit the QM patch to expire; and,
  • Directing Congress to authorize FHFA to charter competitor guarantors to the GSEs and to re-charter each GSE on the same charter available to these potential competitors.

The Treasury Plan also directs Congress and FHFA to revisit the GSE multifamily framework to ensure that federal support is tailored to an “affordability mission.” The Plan specifically recommends that Congress limit both “the aggregate footprint of multifamily guarantors” and the “multifamily mortgage loans that are eligible to secure Government-guaranteed multifamily MBS to ensure a close nexus to a specified affordability mission.” (Treasury Plan, p. 21). Of note, the Plan also directs FHFA to “revisit the GSEs’ underwriting criteria for acquisitions of multifamily loans secured by properties in jurisdictions that adopt rent-control laws or other undue impediments to housing development.” (Treasury Plan, p. 22).

The HUD Plan, released in conjunction with the Treasury Plan, recommends that Federal Housing Authority (FHA) and the FHFA establish a "formalized collaborative approach" to streamline government-supported housing finance programs and ensure they are "not competing and do not crowd private capital out of the marketplace." It also sets forth specific recommendations to reduce risk in the FHA portfolio and update FHA's technology.

House Financial Services Committee Chairwoman Maxine Waters (D-CA) immediately issued a statement suggesting that the Plan may diminish “opportunities for homeownership, increase housing costs” and make housing less available. On the Senate side, the Senate Banking Committee will hold a hearing on Sept. 10 titled “Housing Finance Reform: Next Steps” featuring as witnesses Treasury Secretary Steven Mnuchin, HUD Secretary Ben Carson, and FHFA Director Dr. Mark Calabria, to further discuss the Plan.

In coming days, Nareit will be engaging with relevant officials at the Treasury Department, FHFA, and with Members of Congress and staff to ensure that the interests of Nareit members are understood as steps to implement the Plan move forward.  


Please do not hesitate to contact Victoria Rostow, SVP, Regulatory Affairs & Deputy General Counsel (, (202) 739-9431); Cathy Barre, EVP & General Counsel (, (202) 739-9422); or, Tony Edwards, Senior EVP (, (202) 739-9408) with any related questions.