Most of the concerns about the new regulation hinge on how much profit the GSEs can make under the bumped-up capital levels. Most industry observers appear to be on the side of “not enough.”
The senators write: “The CFPB and FHFA must also have plans to use their respective tools and authorities to immediately address trends that indicate borrowers are receiving inaccurate information or unequal treatment, or that servicers are not complying with the law.”
Taking a close look at the much more stringent capital norms for the GSEs, Matthew Howlett, an equities analyst at Nomura, reiterated his buy rating for Fannie Mae. The hitch? He assumes a ROE of 11.4% by 2024.
According to former Fannie Mae CFO Tim Howard, the re-proposed capital requirements are almost 40 times the average of that indicated by stress tests conducted on the GSEs last year.
The move suggests the GSEs’ public offerings — estimated by some to be worth as much as $200 billion — may take place in the midst of the worst economic crisis since the Great Depression.
Under the FHFA’s latest guidance, borrowers will be eligible for Fannie Mae- and Freddie Mac-backed financing after their COVID-19-related forbearance period ends.