Fannie Mae and Freddie Mac Can Continue to Retain Earnings
The Federal Housing Finance Agency (FHFA) and the U.S. Department of the Treasury yesterday announced that Fannie Mae and Freddie Mac (the Enterprises) can continue to retain earnings until they satisfy the requirements of the 2020 Enterprise capital rule. Under the 2020 final capital rule, Fannie Mae and Freddie Mac’s combined risk-based capital requirements would have been $283 billion as of June 30, 2020.
Before the announcement, the amount of capital that Fannie and Freddie could hold was capped at a combined $45 billion. The changes announced yesterday remove those caps and allow the Enterprises to continue accumulating reserves toward their newly implemented target. That process is expected to take a number of years, meaning that the Enterprises — which have been in conservatorship since 2008 — will likely remain there for the foreseeable future.
This leaves it to the incoming Biden administration to decide on the future reforms and status of Fannie and Freddie.
View FHFA’s press release.Latest from NAHBNow
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