Regulators agree to begin ‘activities-based review’ of secondary mortgage market

Financial regulators will be considering whether there should be more policing of the secondary mortgage market activities, according to a readout issued Tuesday by the Financial Stability Oversight Council (FSOC).

According to the readout (released by the Treasury Department), the FSOC met Tuesday in executive (secret) session by telephone. The readout notes that, during the telephone call, the members of FSOC (who are the heads of the various federal banking, credit union and financial regulators) “heard an update from staff regarding an activities-based review of secondary mortgage market activities.”

Following that release, the Federal Housing Finance Agency (FHFA), the regulator of the “government-sponsored enterprises” (GSEs) Fannie Mae and Freddie Mac, and the Federal Home Loan Bank System, issued a release quoting that agency’s chairman Mark Calabria.

“Today, during the Financial Stability Oversight Council’s (FSOC) Principals Meeting it was announced that FSOC will begin an activities-based review of the secondary mortgage market,” Calabria stated. “In December, FSOC implemented an activities-based approach for identifying and addressing potential risks to financial stability.”

Calabria said he applauded the activities-based review. “As demonstrated by the 2008 financial crisis and again by COVID-19, Fannie Mae and Freddie Mac must be well capitalized in order to support the mortgage market during a stressed environment.”

He said the review will assess both the risk that activities in the secondary mortgage market pose to the stability of the financial system, and the efficacy of various risk mitigants.

Readout of Financial Stability Oversight Council Meeting

Director Calabria Supports FSOC Starting an Activities-Based Review of the Secondary Mortgage Market