FHFA Re-Proposes Capital Rule to Move GSEs from Conservatorship
The Federal Housing Finance Agency yesterday issued a notice of proposed rulemaking that establishes a new regulatory capital framework for Fannie Mae and Freddie Mac. The proposed rule is a re-proposal of the notice of proposed rulemaking published in July 2018.
FHFA noted while the 2018 proposal remains the foundation of the re-proposal, enhancements in the new proposal preserve its mortgage risk-sensitive framework, while increasing the quantity and quality of the Enterprises’ regulatory capital and reducing the pro-cyclicality of the aggregate capital requirements.
FHFA Director Mark Calabria said together, the enhancements in the re-proposal ensure each Enterprise’s safety and soundness and its 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.
“This national health crisis has affirmed the importance of the Enterprises’ mission to serve the American housing market during good times and bad,” Calabria said. “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.”
Mortgage Bankers Association Senior Vice President of Commercial/Multifamily Mike Flood said in response to the 2018 proposal, MBA had urged FHFA to re-propose the capital rules and to provide additional information on the data and rationale forming the basis for elements of the capital rules, including calibration of risk-based capital requirements across the GSEs’ respective multifamily programs.
Fannie Mae CEO Hugh R. Frater issued a brief statement in support. “FHFA’s proposed regulatory capital rule marks the start of an important new chapter for Fannie Mae,” he said. “These next steps toward our recapitalization and release from conservatorship are more than 10 years in the making.”
FHFA said the re-proposal will be open for comments, due 60 days after the notice is published in the Federal Register.