In proposing modifications to the Suspended Counterparty Program, the Federal Housing Finance Agency has actually stopped working to describe why dramatically broadening the program is required and why the program’s administration is not fulfilling the appropriate policy goals, the American Bankers Association and 2 other banking associations stated today in joint remarks to the firm.
The FHFA in July proposed rulemaking to broaden the classifications of “covered misconduct” under which a counterparty suspension might be based. In addition, the firm would have the ability to provide an instant suspension order when the misbehavior has actually led to debarment, suspension or minimal rejection of involvement enforced by a federal firm. In their remarks, the associations stated the FHFA offers no reasoning for the requirement for the growth, nor does it use any information recommending that Fannie Mae and Freddie Mac have actually remained in any method materially damaged by the firm’s failure to suspend counterparties for civil or administrative sanctions.
“The proposed rule completely disregards the impact of being suspended from FHFA regulated sources of funding—placement on the SCP results in the inability of the mortgage business to operate,” the associations stated. “Given the extreme economic and reputational harm that counterparties could face, FHFA should not impose such disproportionate and draconian sanctions on the basis of findings of misconduct in the context of civil enforcement actions.”