At Tuesday's Senate Banking Committee hearing on the Trump administration’s plans for housing-finance reform, Treasury Secretary Steven Mnuchin shed some light on how renegotiating the preferred stock purchase agreements between the Treasury Department and the Federal Housing Finance Agency might impact plans to recapitalize Fannie Mae and Freddie Mac. It turns out, there may be slightly less to ending the net worth sweep than meets the eye.
Responding to a question from the chairman of the committee, Sen. Mike Crapo, R-ID, about the next steps for the Treasury, Mnuchin pointed out that not all the money from the sweeps would go back to FHFA.
“Our priority is to make sure that the GSEs have more capital,” Mnuchin said. “We’re in active discussions with [FHFA] Director [Mark Calabria] and FHFA about removing the net worth sweeps. That would allow a significant amount of capital to be accumulated.”
But Mnuchin qualified that statement, saying that, in return, the Treasury would “make sure that the taxpayers are compensated for the ongoing Treasury support. That’s something that the director and I hope to achieve very quickly.”
This could, of course, simply be a prelude to the “commitment fee” often discussed as a replacement for the PSPA. If so, the dollar figure that the Treasury and FHFA settle on could be an indication of what to expect when and if the GSEs exit conservatorship.
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