The New FHFA GSE Scorecard: A Hollowed-Out Document
The Federal Housing Finance Agency (FHFA) on February 16 released its 2021 Scorecard for the government-sponsored enterprises (GSEs) Freddie Mac and Fannie Mae (and their securitization processing joint venture). This is the tenth such scorecard, a tool originally developed by FHFA Acting Director Edward DeMarco in 2012 to give the GSEs specific policy direction as the conservatorships—originally expected to be of short duration—dragged on with no observable end in sight. It was designed to be a public document to provide transparency to the mortgage industry and policy community so their members understood where the FHFA was taking the GSEs during conservatorship; more broadly, it was also meant to show transparently to taxpayers, who were (and still are) financially supporting the companies, what was being done with their money.
Until current FHFA Director Mark Calabria revised the scorecard’s title a year ago, it was called the “conservatorship scorecard” because it focused on the housing finance policy actions that the FHFA director (first Mr. DeMarco, then Mr. Mel Watt), acting as conservator, wanted the two companies to pursue. It had only a small overlap with FHFA’s regulatory responsibilities, which focus primarily on safety and soundness. It similarly had only a small overlap with the conservator’s stewardship of the companies’ commercial activities. Stewardship of those activities was mainly delegated, though with close oversight by FHFA staff, to the companies’ boards, which were then heavily populated by directors with strong commercial pedigrees from financial institutions and housing-related careers.
The 2021 scorecard has at least 36 specific goals, and they are riddled with problems. Many duplicate existing obligations on the companies, others are contradictory, some are simply unclear, and several are outright impossibilities. Not every one of the 36 goals is problematic, but enough are so that the document is quite weak. At times, the scorecard appears to engage in signaling about ideology rather than providing implementable direction for the GSEs. Furthermore, the criteria for its goals are entirely qualitative and judgmental, never quantitative; this absence of quantitative criteria further erodes the scorecard’s transparency. Taken together, these weaknesses greatly decrease the scorecard’s value as a communications vehicle: it conveys less content with less value, and it does so less transparently.
This is unfortunate. As I explain in my new paper, “The Many Flaws and Weaknesses of FHFA’s 2021 GSE Scorecard," the conservatorship scorecards through 2019 delivered tremendous policy transparency to the public, and were generally regarded by the industry as decent quality products, regardless of whether one agreed or disagreed with specific items. Regrettably, this has been lost these past two years, as FHFA has downgraded the scorecards in almost every way possible. We now have a hollowed-out GSE scorecard, with little value to the public.