FHFA to Re-Propose Enterprise Capital Rule in 2020

A year after proposing regulations on capital requirements for Fannie Mae and Freddie Mac, the Federal Housing Finance Agency said it plans to re-propose the entire regulation some time in 2020.

“The 2018 Capital Rule was proposed before FHFA began the process of retaining capital at the Enterprises as a first step toward ending the conservatorships,” said FHFA Director Mark Calabria in a statement. “In fairness to all interested parties, the comments submitted during the previous rulemaking were submitted under a different set of assumptions about the future of the Enterprises. During the process of the rulemaking, important issues were identified that will be addressed in the re-proposal.”

FHFA suspended regulatory capital requirements after placing Fannie Mae and Freddie Mac into conservatorships in September 2008. In June 2018, then-FHFA Director Mel Watt issued a proposed Capital Rule (https://www.fhfa.gov/SupervisionRegulation/Rules/Pages/Enterprise-Capital-Requirements.aspx) to develop a Conservatorship Capital Framework to align capital guidelines for both Enterprises. At the time, FHFA developed this aligned risk management framework to better inform each Enterprise’s business decisions while in conservatorship and both Enterprises use the CCF to make their regular business decisions. FHFA also uses the CCF in its role as conservator to assess Enterprise guarantee fees, activities, and operations and to guard against the Enterprises making competitive decisions that could adversely impact safety and soundness. 

Watt left FHFA in January; his temporary successor, Office of the Comptroller of the Currency Joseph Otting, suggested in June that FHFA planned to finalize a Capital Rule sometime over the summer. However, once Calabria came on board he has made his own mark on the agency’s priorities, noting last week, for example, that he sees a path to Fannie Mae and Freddie Mac exiting the federal government conservatorship in the next few years.

“The Capital Rule is one of the most important rules I will issue as Director,” Calabria said. This rule will be re-proposed and finalized within a timeline fully consistent with ending the conservatorships. Requiring the Enterprises to build capital that can properly support their risk ensures that taxpayers will never be on the hook again during an economic downturn.”