FHFA settles public disclosure guidelines for Freddie Mac and Fannie Mae

The Federal Housing Finance Agency provided its last guideline concerning public disclosure requirements for Fannie Mae and Freddie Mac on business governance, danger management, capital structure and capital requirements, lining up the government-sponsored business with what big banks currently do.

The GSEs need to release their preliminary public disclosure reports under this last guideline in the very first quarter of 2023. This enables Fannie Mae and Freddie Mac to develop internal reporting and governance functions and will lessen duplicative reporting by lining up the schedule of yearly qualitative disclosures with their yearly 10-K filings with the Securities and Exchange Commission, the last guideline stated.

“By allowing market participants to assess key information about the Enterprises’ risk profiles and associated levels of capital, this final rule will promote transparency and encourage sound risk management practices at the Enterprises,” stated Sandra Thompson, who was validated as FHFA director by the Senate Wednesday. “The rule published today will foster financial stability at the Enterprises and in the broader housing finance market.”

Both Fannie Mae and Freddie Mac accepted the FHFA for remark.

The Mortgage Bankers Association asked the FHFA to embrace the guideline as proposed in its December remark letter.

“MBA supports a key premise of the rulemaking — namely, that allowing all market participants to evaluate these important details about the Enterprises’ risk profiles and capital levels should promote market discipline (particularly from investors in Enterprise equity and debt upon their exit from conservatorship) and thereby bolster the safety and soundness of the Enterprises,” the letter checked out.

The integrated $84 billion of kept capital since March 31 leaves the business $174 billion except what they require under the February modification to the capital structure, according to an analysis of the GSEs’ very first quarter profits by Keefe, Bruyette & Woods.

It might take in between 7 and 9 years for the 2 business to fulfill their targets, stated KBW expert Bose George.

“However, we note this timeline is highly variable and could be elongated for several reasons,” he composed. “Apart from the variability of earnings, the run rate minimum capital number assumes a meaningful increase in the use of credit risk transfer, which would reduce their risk-based assets and in turn reduced adjusted minimum capital required.”


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