FHFA, Treasury allow GSEs to continue retaining earnings

The Federal Housing Finance Agency and Treasury Department updated the Preferred Stock Purchase Agreements allowing Fannie Mae and Freddie Mac to continue to retain earnings until they satisfy the requirements of the 2020 GSE capital rule.

In announcing the amendments, FHFA Director Mark Calabria said "more hard work remains" because retained earnings alone are insufficient to adequately capitalize the enterprises.

The deal allows the GSEs to raise private capital and exit conservatorship once certain conditions are met, ultimately ending the sweep of their earnings to Treasury.

The amendments also “lock in” certain items such as level pricing and equal access for all regardless of loan sale volume. There is also a provision that requires the FHFA and Treasury to work together to resolve Treasury’s compensation for its support.

ICBA is reviewing the amendments and will work with the FHFA to ensure community banks continue to have equal access to the GSEs and they continue to provide the liquidity needed to support the housing market.

In a statement this week, ICBA said it strongly supports Calabria’s efforts to fully recapitalize Fannie and Freddie and put them on the path to safely exit conservatorship, as required by law.