Analyst Richard Bove thinks the new net worth sweep agreement is just a gimmick because the liquidation preference on Treasury’s preferred stock will offset any increase in the GSEs’ capital buffers.
Departing GSE executive David Lowman: “With over six years at Freddie Mac, I want to take advantage of opportunities presented by the rapidly evolving mortgage finance marketplace and its adjacent industries."
Fannie and Freddie will be able to retain all their second-quarter profits, rather than forward them to Treasury. Combined, the GSEs will add $5.2 billion to their net worth this month.
SOFR-linked debt is vulnerable to much higher rate volatility than those referencing LIBOR. This risk was highlighted last month when surging repo rates sent SOFR briefly to a record 5.25%.