The new rule gives Fannie and Freddie two years to come up with a resolution plan that includes no government support in the event of a crisis. Housing finance experts say: “Good luck with that.”
Mortgage industry groups continue to put pressure on the Treasury Department and the Federal Housing Finance Agency to revisit the restrictions on the amount of loans Fannie Mae and Freddie Mac can purchase.
The proposed rule would require the GSEs to write living wills that include no government support. However, their PSPA with Treasury includes letters of credit with an outstanding balance of $254 billion.
The co-inventor of the MBS says Fannie and Freddie should be regulated as utilities to improve their affordable housing and racial equity activities. He recommends Treasury use its equity to fund joint venture.
The new PSPA will allow Freddie Mac and Fannie Mae to continue retaining earnings until they reach the regulatory minimum capital — almost $283 billion combined.
Justice Stephen Breyer raised eyebrows by characterizing the government’s net worth sweep of Fannie Mae and Freddie Mac profits as nationalization of the GSEs.
It will be the 11th issuance of its type by loanDepot.
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