The Federal Housing Finance Agency (FHFA) is seeking comments on a proposed regulation on capital requirements for Fannie Mae and Freddie Mac (the Enterprises). The proposed rule would implement a new framework for risk-based capital requirements and a revised minimum leverage capital requirement for the Enterprises.
FHFA suspended regulatory capital requirements after placing the Enterprises into conservatorships in September 2008. While the capital requirements in this rule would also be suspended while the Enterprises remain in conservatorship, FHFA believes it is appropriate to communicate the Agency’s views as a financial regulator about capital adequacy and to allow market participants and all stakeholders to comment on the proposed capital requirements.
“We think it is important for FHFA, as the prudential regulator for Fannie Mae and Freddie Mac, to articulate our views on capital requirements and to start a healthy discussion about the amount of capital the Enterprises should have to appropriately shield taxpayers from assistance,” said FHFA Director Melvin L. Watt. “In addition, feedback on this proposed rule will inform FHFA’s views as conservator in making possible refinements to our assumptions about capital as we evaluate the Enterprises’ business decisions during conservatorship.”
The proposed rule builds on FHFA’s work with the Enterprises to develop a Conservatorship Capital Framework (CCF) that is now being used to align capital guidelines for both Enterprises. Despite the Enterprises’ limited ability to hold capital under the Senior Preferred Stock Purchase Agreements (PSPAs), FHFA developed this aligned risk management framework to better inform each Enterprise’s business decisions while in conservatorship and both Enterprises use the CCF to make their regular business decisions. FHFA also uses the CCF in its role as conservator to assess Enterprise guarantee fees, activities, and operations and to guard against the Enterprises making competitive decisions that could adversely impact safety and soundness.
FHFA invites interested parties to submit comments on the proposed rule via FHFA.gov within 60 days of publication in the Federal Register or via mail, FHFA, Eighth Floor, 400 Seventh Street, SW, Washington, DC 20219. FHFA will also be holding a webinar on the proposed rule on June 19 at 1:30 p.m. EDT to explain the proposed rule and answer questions. Register for the webinar here.