The issue presents a potential conflict in securitization transactions because lenders typically take a borrower’s word on income reporting, according to two Federal Reserve economists.

The GSEs won’t accept LIBOR-based loan applications after Sept. 15. They expect all purchases linked to the London rate to cease by yearend.

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.

If the new rule had been in effect at 3Q19, CRT would have reduced the GSEs’ capital requirement by $22.1 billion. On the other hand, CRT provisions under the 2018 version would have provided $41.3 billion.

Directed by its regulator to curtail non-insurance front-end risk transfer deals, Fannie is piling into CIRTs instead.

The FHFA has adopted bank-like capital standards for Fannie and Freddie, but the result won’t be bank-like returns on equity, making a public stock offering for the two entities more difficult.

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.