By Dennis Hollier / dhollier@imfpubs.com

New GSE regulator Mark Calabria Tuesday afternoon told a gathering of Realtors that the ultimate business model of Fannie Mae and Freddie Mac should be shaped by Congress, not his new employer, the Federal Housing Finance Agency.

It was the same view shared by his predecessor Mel Watt, who retired from the agency in early 2019.

“Fundamentally, if there’s going to be a change to the model, Congress is going to do that,” he said speaking before a National Association of Realtors’ legislative affairs conference.  

“That’s really the way it happens,” he said. “We will not be putting forth a proposal that says, ‘Okay, this is what you should do with the overall system.’ We’ll put out a proposal that says, ‘If this is the model and these are the regulatory tools, I need to make sure this model is safe.’”

During a question and answer session at the NAR show, he also touched on the issue of GSE recapitalization plans, noting that allowing Fannie and Freddie to build capital through retained earnings would take a long time. (The current maximum GSE capital cushion is $3 billion.)

“It’s hard for me to see how they can ever, in a reasonable amount of time, be capitalized simply through retained earnings. You just don’t have that kind of earnings power over time.” Nevertheless, he was optimistic that the capital markets would be interested in a new Fannie/Freddie IPO.

For the full story see the next edition of Inside Mortgage Finance.