October 3, 2019
The U.S. Department of the Treasury and the Federal Housing Finance Agency (FHFA) announced it would allow the government-sponsored enterprises — the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. — to retain up to $45 billion in combined capital, as they prepare to leave conservatorship and move toward privatization.
“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, in a statement. “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.”
Freddie Mac repaid a total of $119.7 billion to the Treasury, which exceeded its original draw during the financial crisis by about $48.1 billion. Fannie Mae, in the meantime, has repaid a total of $181.4 billion, compared to its draw of $119.8 billion.
The housing industry supported the move by Treasury and the FHFA, with the Community Home Lenders Association praising FHFA Director Mark Calabria and Treasury Secretary Steven Mnuchin for the agreement. The National Association of Federally Insured Credit Unions added that the move is necessary to ensure the housing industry’s safety.
“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.
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