The Federal Housing Finance Agency (FHFA) has announced that it will revisit its proposal to amend the Suspended Counterparty Program (SCP).
The SCP regulation requires a regulated entity to report to FHFA if an individual or institution that it does business with has committed certain types of misconduct within the prior three years. It also authorizes FHFA to order its regulated entities to cease doing business or refrain from entering into new business with certain counterparties. Final suspension orders are published on FHFA’s website.
FHFA is publishing this re-proposal after considering issues that commenters had raised about the original proposed rule, issued in July 2023. This includes distinguishing between misconduct that poses material risk to the safety and soundness of the regulated entities from behavior with de minimis impact.
“Amending the Suspended Counterparty Program will help strengthen FHFA’s ability to protect its regulated entities from risks presented by other businesses that engage in misconduct,” said FHFA Director Sandra L. Thompson. “FHFA has carefully reviewed the feedback from stakeholders in developing this re-proposal, which will better ensure the regulated entities’ safety and soundness so they continue to serve as a reliable and stable source of liquidity for the U.S. housing finance system.”
Specifically, the re-proposal would:
- Authorize the suspension of business between a regulated entity and a counterparty whose misconduct resulted in a federal prohibition order or a civil money penalty above a specific threshold; and
- Authorize the suspension of business between a regulated entity and a counterparty that has committed criminal or civil misconduct related to the management or ownership of real property.
“A re-proposal is a smart move, and we commend FHFA for its receptiveness to our strong opposition to the initial proposal, which would have punished counterparties for potentially minor civil or administrative sanctions,” said Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit, CMB. “The re-proposal appears to address some of MBA’s significant concerns outlined in our joint comment letter. We are pleased to see the elimination of the proposed immediate suspension order, refinements that preserve due process, and a narrowing of the application of the SCP to violations of a certain magnitude or gravity.”
FHFA invites comments on the re-proposed rule within 60 days of its publication in the Federal Register. Comments on the re-proposed rule should be submitted electronically or via mail to the Federal Housing Finance Agency, Office of General Counsel, Attention: Comments/RIN 2590-AB23, 400 Seventh Street, SW, Washington, DC, 20219.
