WASHINGTON–The Federal Housing Finance Agency, which currently operates Fannie Mae and Freddie Mac under conservatorship, and the Treasury Department have agreed to reinstate a $3 billion capital reserve amount under the Senior Preferred Stock Purchase Agreements for each Enterprise beginning in the fourth quarter of 2017.
“While it is apparent that a draw will be necessary for each Enterprise if tax legislation results in a reduction to the corporate tax rate, FHFA considers the $3 billion capital reserve sufficient to cover other fluctuations in income in the normal course of each Enterprise’s business,” said FHFA Director Mel Watt. “We, therefore, contemplate that going forward Enterprise dividends will be declared and paid beyond the $3 billion capital reserve in the absence of exigent circumstances.”
The banking industry has responded with approval of the plan.
Camden R Fine, president of the Independent Community Bankers of America, said, “ICBA has been an ardent supporter of allowing the government-sponsored enterprises to rebuild their capital buffers, which had been scheduled to drop to zero at the end of the year, to avoid another taxpayer bailout and support the mortgage market. Fannie and Freddie have transferred more than $280 billion to the Treasury since 2013—nearly $100 billion more than the capital infusion they received during the Wall Street financial crisis. While this sweep of GSE revenue has been a great investment for the federal government, it harms the taxpayers and community banks that depend on the liquidity that Fannie Mae and Freddie Mac provide.”