The Biden administration has nominated Sandra Thompson, the acting director of Fannie Mae and Freddie Mac’s federal regulator, to a full five-year term, ending speculation that a consumer advocate who favored turning Fannie and Freddie into regulated utilities might get the job instead.

After appointing Thompson as acting director of the Federal Housing Finance Agency (FHFA) in June, the White House had reportedly been considering naming Mike Calhoun, the president of the Center for Responsible Lending, as the agency’s permanent head.

Last year, the Center for Responsible Lending released a report advocating that FHFA continue regulating Fannie and Freddie as if they were utilities, “pooling risk nationally” and offering “broad access to affordable mortgage credit nationwide.”

That’s a direction opposed by many conservatives, who were dismayed when the Biden administration derailed Republicans’ plans to recapitalize and privatize Fannie and Freddie.

Congress could still decide that the public utility approach — also favored by the National Association of Realtors — is the best course of action. In the mean time, the Biden administration has provided some certainty to the mortgage lending industry by nominating Thompson, a veteran regulator with a long track record, as FHFA’s permanent director.

The Mortgage Bankers Association welcomed Thompson’s nomination, saying Thompson’s “in-depth expertise as a regulator and her experience in real-estate finance makes her the perfect choice” to lead the agency. The American Bankers Association issued a similar statement, lauding Thompson’s “strong understanding of the primary and secondary mortgage markets, along with her extensive experience in financial regulatory issues.”

In addition to Fannie Mae and Freddie Mac, FHFA oversees the Federal Home Loan Bank System and is responsible for oversight of the $7.2 trillion mortgage finance market.

Sandra Thompson

Thompson — whose candidacy was reportedly backed by influential California Democrat Rep. Maxine Waters, chair of the House Financial Services Committee — has more than that four decades of experience in financial regulation and risk management.

Before joining FHFA in 2013 as a deputy director of the agency’s Division of Housing Mission and Goals, Thompson served for more than 23 years the Federal Deposit Insurance Corporation (FDIC), leading the agency’s examination examination and enforcement program for risk management and consumer protection at the height of the financial crisis.

MBA President Bob Broeksmit noted that as acting director, Thompson “has addressed several topline issues,” including rescinding a fee on refinancing, extending pandemic-related flexibilities to borrowers, enhancing Fannie and Freddie’s new refinance programs for low-income borrowers, and overseeing their mission of creating equitable and sustainable solutions for affordable housing and rental opportunities.

“We hope that this will be a quick confirmation process and look forward to continuing our work with Acting Director Thompson, FHFA, and [Fannie and Freddie] to ensure a stable and robust secondary mortgage market for a wide variety of single-family and multifamily lenders, regardless of size or business model,” Broeksmit said in a statement.

In September, FHFA reversed controversial limits on Fannie and Freddie’s purchases of mortgages with “multiple higher risk characteristics,” as well as loans secured by second homes and investment properties. The limits were implemented by the Trump administration, which intended to trim Fannie and Freddie’s market share and help them raise capital so they could be privatized.

FHFA has ordered Fannie and Freddie to submit equitable housing finance plans by the end of year demonstrating how they plan to help reduce racial or ethnic homeownership gaps over the next three years. The plans — which will take effect on Jan. 1 — are to identify and address barriers to sustainable housing opportunities.

“For generations, discriminatory practices like redlining have prevented communities of color from building wealth through homeownership,” Thompson said at the time. “By identifying the barriers to equitable and sustainable housing finance opportunities and setting goals for addressing those barriers, [Fannie and Freddie], consistent with safety and ​soundness, can responsibly reduce the racial and ethnic disparities in homeownership and wealth that still exist today.”

Separately, FHFA has put Fannie and Freddie on notice that it wants at least 35 percent of the purchase loans the mortgage giants back over the next three years to be made to low- and very-low income borrowers, up from 30 percent today.

A record increase in the 2022 conforming loan limit next year could complicate achieving those goals, with Fannie and Freddie cleared to purchase and guarantee mortgages of up to $647,200 in most of the country, and close to $1 million in 100 counties concentrated in nine metro areas.

One of the nation’s biggest issuers of private-label mortgage backed securities, Redwood Trust, has warned that the higher loan limits unnecessarily expand the government-backed mortgage giants’ footprints into markets better served by private lenders, and detract from their mission of supporting housing affordability.

In a Nov. 25 op-ed, Peter J. Wallison, a senior fellow emeritus at the conservative-leaning American Enterprise Institute, blamed Fannie and Freddie for the 2007-09 housing bust and recession, claiming that they “brought down the U.S. housing market by reducing down payments and loosening underwriting standards.”

“Here we go again,” Wallison wrote of the higher loan limits and affordable housing goals. “The only difference between what the administration is proposing, and what brought about the 2008 financial crisis is that the economy is already in an inflationary period, induced by the administration’s other policies.”

The Senate Banking Committee will hold a hearing on Thompson’s nomination, which must be confirmed by a majority of the Senate. Senate Banking Committee chair Sen. Sherrod Brown, an Ohio Democrat, said in a statement that Thompson “has refocused regulation of [Fannie and Freddie] on ensuring that they fulfill their mission to provide safe, sustainable access to housing across the country. I look forward to holding her nomination hearing soon and encourage my colleagues to support her nomination.”

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Email Matt Carter

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