FHFA Re-Proposes GSE Capital Rule

FHFA Re-Proposes GSE Capital Rule

May 20, 2020
Photo credit: Getty Images/krblokhin
The Federal Housing Finance Agency has announced that it is seeking comments on a notice of proposed rulemaking that establishes a new regulatory capital framework for Fannie Mae and Freddie Mac (the GSEs). The proposed rule is a re-proposal that was originally published in July of 2018. Comments will be due 60 days after the notice is published in the Federal Register.
"This national health crisis has affirmed the importance of the Enterprises' mission to serve the American housing market during good times and bad,” said FHFA Director Mark Calabria. “When credit dries up, low- and moderate-income households are hurt most. We must chart a course for the Enterprises toward a sound capital footing so they can help all Americans in times of stress. More capital means a stronger foundation on which to weather crises. The time to act is now."
The 2018 proposal remains the foundation of the re-proposal. The enhancements in the new proposal preserve the mortgage risk-sensitive framework of the 2018 proposal, while increasing the quantity and quality of the GSEs' regulatory capital and reducing the pro-cyclicality of the aggregate capital requirements. Together, the enhancements in the re-proposal ensure the safety and soundness of each GSE, and their ability to fulfill its statutory mission across the economic cycle, in particular, during periods of financial stress. The re-proposal is also a critical step toward responsibly ending the conservatorships.
“FHFA’s proposed regulatory capital rule marks the start of an important new chapter for Fannie Mae,” said Hugh R. Frater, Chief Executive Officer of Fannie Mae. “These next steps toward our recapitalization and release from conservatorship are more than 10 years in the making, and we thank Director Calabria for his leadership during this process.”
David Brickman, CEO of Freddie Mac, commented: “The re-proposal of this critical rule marks another important milestone in our path out of conservatorship. I thank Director Calabria for his leadership in moving this rule forward. As Freddie Mac takes unprecedented steps to assist homeowners and renters adversely affected by COVID-19, we remain focused on preparing for our responsible exit from conservatorship.”
Today’s actions are just another measure the FHFA has taken this week to facilitate the GSE’s exit from conservatorship, as on Monday, the FHFA commenced a request for proposal process to secure a financial advisor for both Fannie Mae and Freddie Mac.