January Newsletter
Washington Policy Update
Allison Karakis, Government Relations Director
The start of the new year brings an increased focus on the midterm elections as primary ballot deadlines loom. For many elected officials, the primary election is their biggest hurdle as they face opposition from within their own party. This creates increased urgency for Democrats to pass President Biden’s major legislative priorities, but narrow majorities continue to hamper that effort.
The Build Back Better bill that passed the House, failed to gain the support of all 50 Democratic Senators and negotiations were put on hold due to lack of progress. Democratic leadership turned their focus to voter rights legislation that, although supported by all Democrats in Congress, didn’t have the support for a rule change to allow Senate passage with a simple majority.
Despite the challenges, a flurry of legislative activity rounded out the year with the debt ceiling being increased by $2.5 trillion and a continuing resolution extended government funding to Feb. 18. Additionally, a compromise was reached to pass the annual National Defense Authorization Act.
FHFA Rejects Fannie and Freddie’s Duty to Serve Plans
Federal Housing Finance Agency (FHFA) rejected Fannie Mae’s and Freddie Mac’s revised 2022-2024 Underserved Markets Plans (Plans), developed under the Duty to Serve (DTS) program, for all three underserved markets. Under the DTS program, Fannie Mae and Freddie Mac prepare and submit 3-year Plans to detail their activities to serve the manufactured housing, rural housing and affordable housing preservation markets.
Fannie and Freddie have been directed to submit additional revisions to the current Plan to improve impact. FHFA ultimately reviews and issues non-objection to those Plans, based on the intended impact in each market. In the meantime, implementation will continue without interruption based on objectives in the current proposed Plans. 
FHFA Increases Upfront Fees on Certain Loans
FHFA announced targeted increases to Fannie Mae and Freddie Mac’s upfront fees for certain high-balance and second-home loans beginning April 1, 2022. High-balance loans are mortgages originated in certain designated areas above the baseline conforming loan limit.
Upfront fees for high-balance loans will increase between 0.25 percent and 0.75 percent, tiered by loan-to-value ratio. For second-home loans, upfront fees will increase between 1.125 percent and 3.875 percent, tiered by loan-to-value ratio.
LIBOR Bill Passes House
The House passed HR 4616 “Adjustable Interest Rate (LIBOR) Act of 2021” by an overwhelming majority. The bill provides for a transition to a replacement rate selected by the Board of Governors of the Federal Reserve System in the event a contract referencing LIBOR does not have a fallback or a replacement rate provision in effect when LIBOR is retired. The bill also provides for conforming changes to these contracts, the continuity and enforceability of these contracts and protections against liability resulting from the transition.
Nominations and Changes at Regulatory Agencies
President Biden announced several recent nominations including Sandra Thompson to Director of FHFA. Jerome Powell was nominated for a second term as Chairman of the Board of Governors of the Federal Reserve System and Dr. Lael Brainard was nominated to serve as Vice Chair. He also nominated former Fed governor Sarah Bloom Raskin to serve as Vice Chair for Supervision and Lisa Cook, a current Board member for FHLBank Indianapolis, and Philip Jefferson to the Board of Governors.
Hearings for many of the nominees have been held and Senate Banking Chair Sherrod Brown (D-OH) has committed to moving quickly toward Senate confirmation of the nominees.
Jelena McWilliams submitted her resignation from the Federal Deposit Insurance Corporation (FDIC) which becomes effective Feb. 4. This was an outcome of a Board conflict that challenged her authority as Chairman.

Heckles Nominated to Region 3 HUD Regional Administrator
President Biden nominated Matthew Heckles to Region 3 Housing and Urban Development (HUD) Regional Administrator. Region 3 serves Delaware, Maryland, Pennsylvania, Virginia, West Virginia, and Washington, D.C.
Matthew Heckles previously served as the Assistant Secretary of the Maryland Department of Housing and Community Development and the Director of the Community Development Administration. Prior to his service in Maryland, he worked in various positions at the Delaware State Housing Authority for more than 12 years.
OCC Approved Application for Fintech to Create Bank
The Office of the Comptroller of the Currency (OCC) conditionally approved applications from Social Finance, Inc. to create SoFi Bank, N.A, as a full-service national bank headquartered in Cottonwood Heights, Utah. As part of the transaction, SoFi Bank, N.A. will acquire Golden Pacific Bank, N.A, a national bank insured by the FDIC.
Upon consummation of this transaction, SoFi Bank, N.A., will have $5.3 billion in total assets and $718 million in capital at the end of the first year of operations. The bank will continue to offer a range of local commercial-focused loan offerings and deposit products previously offered by Golden Pacific Bank. SoFi Bank will also provide a fully digital, mobile-first national lending platform for consumers across the country. The merger conditions require specific capital contributions, adherence to an Operating Agreement, and confirmation that the resulting bank will not engage in any crypto-asset activities or services.
Federal Reserve Paper on Central Bank Digital Currency
This Federal Reserve issued a paper called “Money and Payments: The U.S. Dollar in the Age of Digital Transformation” as the first step in a public discussion between the Federal Reserve and stakeholders about Central Bank Digital Currency (CBDC).
The paper opens with a discussion of existing forms of money, the existing state of the U.S. payment system and its relative strengths and challenges. It also addresses the various digital assets that have emerged in recent years, including stablecoins and other cryptocurrencies. The paper then shifts its focus to CBDC, its uses and functions; potential benefits and risks; and related policy considerations.
The paper states that the Federal Reserve will only take further steps toward developing a CBDC if research points to benefits for households, businesses, and the economy overall that exceed the downside risks, and indicates that CBDC is superior to alternative methods. Furthermore, the Federal Reserve would only pursue a CBDC in the context of broad public and cross-governmental support.
The paper includes a request for input on questions that fall into two categories: CBDC Benefits, Risks, and Policy Considerations and CBDC Design.

The questions include:
  • Could a CBDC adversely affect the financial sector? How might a CBDC affect the financial sector differently from stablecoins or other nonbank money?
  • How could a CBDC be designed to foster operational and cyber resiliency? What operational or cyber risks might be unavoidable?
  • What types of firms should serve as intermediaries for CBDC? What should be the role and regulatory structure for these intermediaries?