May 21, 2020
Understanding the Proposed Capital Requirements for Fannie Mae and Freddie Mac
The Federal Housing Finance Agency recently released its updated proposal for regulating the housing finance giants Fannie Mae and Freddie Mac. In a new analysis, AAF’s Director of Financial Services Policy Thomas Wade examines the new rule. While the rule would still only apply if the two government-sponsored enterprises leave federal conservatorship, changes over the last year within Fannie and Freddie make that outcome more likely, Wade writes.
His central points:
- The 2020 proposed rule would require Fannie and Freddie to hold a combined $244 billion in capital, far higher than the combined $23.5 billion they currently hold, and would add a significant number of additional capital buffers borrowed liberally from banking regulation.
- The rule remains predicated on a hypothetical, but the $244 billion should be considered the minimum the FHFA views as required prior to the government-sponsored enterprises exiting conservatorship.