FHFA to Re-Propose Financial Requirements for GSEs

The Federal Housing Finance Agency (FHFA) announced on Monday that it will be re-proposing the updated minimum financial eligibility requirements for Fannie Mae and Freddie Mac.

“FHFA has determined that it is prudent to work with the Enterprises to reassess and re-propose these requirements, including incorporating lessons learned from the evolving COVID-19 national emergency,” the Agency said in a release.

The FHFA told DS News that it would not provide additional comments.

FHFA’s original proposal was made on January 31, 2020, and “will not be finalized and implemented this month as planned.”

The proposed financial requirements released earlier this year sought to improve seller/servicer standards and provide transparency and consistency of the capital and liquidity required with different business models.

“A critical improvement from the minimum financial requirements established in 2015 is addressing the risk factors related to servicing Ginnie Mae mortgages. The updated requirements improve the safety and soundness of the Enterprises by strengthening Seller/Servicer counterparties in the event of an economic downturn,” the January release from FHFA said.

Continuing its path to end conservatorship for the GSEs, the FHAFA announced in February that it selected Houlihan Lokey Capital, Inc., as its financial advisor to assist in the development of a plan to conservatorship of Fannie Mae and Freddie Mac.

The agreement between the FHFA and Houlihan Lokey has up to one year to produce a plan to end privatize the GSEs.

The FHFA’s report states Houlihan Lokey will consider business and capital structures, market impacts, timing, and available capital raising alternatives among other items.

“Hiring a financial advisor is a significant milestone toward ending the conservatorships of the Enterprises," said FHFA Director Dr. Mark Calabria. “The next major milestone for FHFA is the re-proposal of the capital rule, which will happen in the near future."

The contract between the FHFA and the firm is $9 million for the first year. The FHFA has options to extend for an additional four-and-a-half years. The total contract is not to exceed $45 million.