Fannie Mae has announced that it will issue a request for proposals to hire an underwriting financial advisor who will assist in developing and implementing a plan for recapitalizing and responsibly ending its conservatorship. The financial advisor will work closely with the company and FHFA to consider business and capital structures, market impacts and timing, and available capital raising alternatives, among other items.
“While we are fulfilling our mission and helping to keep people in their homes during this national emergency, we also remain committed to ensuring a responsible exit from conservatorship,” said Hugh R. Frater, CEO, Fannie Mae. “Today’s announcement is a significant step on that path, and we look forward to making a timely selection in the competitive process.”
Engaging a financial advisor is an important milestone in meeting Fannie Mae’s 2020 FHFA scorecard objective to prepare a responsible transition plan for a potential exit from conservatorship. The support of private capital will contribute to increasing the resiliency of the housing finance system.
FHFA Director Dr. Mark Calabria told FOX Business late last year that Fannie Mae and Freddie Mac are building the capital necessary to get out of conservatorship, but there is still a little way to go.
"I believe that under the statute I am required to fix [Fannie and Freddie]," Calabria said.
"Fannie and Freddie are less leveraged than when I started," Calabria added. "We're going in the right direction."
Fannie Mae recorded a net income of $14.2 billion last year, including $4.4 billion during Q4 2019.
The GSE’s net worth rose to $14.6 billion by the end of the year. Based on the current agreement with the U.S. Department of the Treasury and the Federal Housing Finance Agency (FHFA), the company can retain quarterly earnings until its net worth reaches $25 billion.
Fannie Mae provided more than $650 billion in liquidity to the mortgage market in 2019, helping finance more than three million purchases, refinances, and rental units.