Treasury to allow Fannie Mae, Freddie Mac to retain $45 billion in capital

The Department of the Treasury and the Federal Housing Finance Agency announced Monday it will now allow the government-sponsored enterprises to retain up to $45 billion in combined capital as they prepare to leave conservatorship.

Earlier this month, Treasury Secretary Steven Mnuchin said the administration is currently looking to end the profit sweep of Fannie Mae and Freddie Mac.

Mnuchin explained that not only was President Donald Trump trying to
end the profit sweep, but he was looking to do it soon.

“We are actively negotiating an amendment to try to get it done by the end of the month,” Mnuchin said at the time.

Now, the FHFA and the Treasury made a joint statement saying the GSEs will be allowed to retain capital as the administration continues to work toward ending conservatorship.

“The enterprises are leveraged nearly 1,000-to-one, ensuring they would
fail during an economic downturn – exposing taxpayers once again,” FHFA
Director Mark Calabria said. “This letter agreement between Treasury and FHFA,
which allows the enterprises to retain capital of up to $45 billion combined,
is an important milestone on the path to reform.”

“FHFA commits to working with Treasury in the coming months to amend
the share agreements and further advance broader housing finance reform,”
Calabria said. “The reform goals include limiting the government’s role in
housing finance, increasing marketplace competition, focusing on affordable
housing and sustainable homeownership. The status quo is not an option. Now is
the time to act.”

Freddie Mac has repaid a total of $119.7 billion to the Treasury,
exceeding its original draw during the financial crisis by about $48.1 billion.
Fannie Mae has drawn a total of $181.4 billion, compared to $119.8 billion that
it drew.

And the housing industry is already responding, commending the administration
for its decision.

“The Community Home Lenders
strongly commends FHFA Director Calabria and Treasury Secretary
Mnuchin for their letter agreement to allow Fannie Mae and Freddie Mac to
significantly increase the amount of capital they are allowed to retain,” CHLA
Executive Director Scott Olson said.

And the National Association of Federally Insured Credit Unions said
this move is critical to ensuring the safety and soundness of the housing industry.

“The Treasury Department and FHFA’s decision to allow Fannie Mae and
Freddie Mac to begin retaining capital reserves is central to preserving the
safety and soundness of the housing finance system, and it will help place the
GSEs on stronger financial footing,” NAFCU President and CEO Dan Berger said.