If the FHFA wants to release the GSEs from conservatorship before President Trump leaves office, it will need a big assist from Treasury. And therein lies the problem.
Under the final rule, Fannie and Freddie will have to hold slightly more than $283 billion in capital. That’s $49 billion more than what FHFA had estimated when it re-proposed the rule in May.
The new rule provides clarity about how much and what kind of capital Fannie and Freddie will need in order to exit conservatorships. But the likelihood of that kind of capital raise seems remote.
The FHLBank System’s outstanding advances fell to $479 billion in the third quarter, down from $557.55 billion in 2Q and $806.94 billion in 1Q. Borrowings by insurance companies were unchanged. (Includes two data charts.)
The third-quarter gain in combined FHLBank profits came despite a slightly lower net interest income, which fell to $1.17 billion from $1.25 billion in the second quarter. (Includes data chart.)
Under the new guidelines, at least 50% of the multifamily loans that Fannie and Freddie purchase must be for affordable housing. That’s up from 37.5% under the prior caps.
It’s not clear why Freddie’s multifamily profits in the third quarter were more than doubled that of its sister company. Fannie’s g-fee was higher and its portfolio larger while Freddie’s MBS issuance spiked in comparison.
The industry was not expecting the FHFA to give ground on 4% Tier I capital for Fannie and Freddie. Now for the big question: What does it mean for lenders?