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Fannie Mae and Freddie Mac won't be exiting conservatorship anytime soon, as the Federal Housing Finance Agency and U.S. Department of the Treasury announced amendments to the Preferred Stock Purchase Agreements. The amendments will allow Fannie and Freddie to continue to retain earnings until they satisfy requirements of the 2020 Enterprise Capital Rule, according to a press release.
“Today's agreement that allows Fannie Mae and Freddie Mac to continue retaining earnings is a step in the right direction, but more hard work remains," said FHFA director Mark Calabria. “Capital at Fannie Mae and Freddie Mac protects the housing finance system and taxpayers. Retained earnings alone are insufficient to adequately capitalize the Enterprises. Until the Enterprises can raise private capital, they are at risk of failing in the next housing crisis."
While it may take some time, the Treasury agreed that the enterprises can raise private capital and exit conservatorship once certain conditions are met, according to the release. The Treasury is also committing to restructure its investment in each Enterprise to facilitate Enterprise equity offerings.
Click here to learn more about the FHFA and Treasury's decision.