The
This ruling means near-term strategic shifts for Fannie Mae and Freddie Mac could come via administrative actions from the executive branch, rather than a protected regulator. It eases the path for further changes to the Preferred Stock Purchase Agreements.
"The Treasury and FHFA have the ability to amend the PSPAs bilaterally, and following the SCOTUS decision, leadership at both Treasury and FHFA serve at the President's will," the Fitch research note said. "In particular, reversal of the net worth sweep could strengthen the government's control over the GSEs by cutting off their ability to grow capital organically, which could create challenges for future administrations to release the GSEs from conservatorship."
The goal in the suit brought by Fannie Mae and Freddie Mac investors was to have the prior FHFA management structure declared to be unconstitutional and thus any actions it took, including the net worth sweep, to be invalid and thus reversed. It was a pyrrhic victory; the Supreme Court agreed with the first point, but other than sending the case back to the lower courts to discuss possible damages, the justices let prior FHFA activities stand.
In the waning days of the Trump administration,
The agreements were
Already some segments of the housing industry are calling for the January agreements
Given that GSE reform coming from Congress
"The president's increased authority over the FHFA and, as a result, the GSE's role in the U.S. housing finance system, may result in more policy shifts in how the GSEs provide liquidity, stability and affordability to the housing finance industry," Fitch pointed out. "Administrative actions achieved by the FHFA instead of more permanent legislative action may be more easily amended by future administrations, which may have differing policies and agendas of how the GSEs' missions may best be achieved."
So far, the Biden administration hasn't articulated its plans for the GSEs, but after the election, observers said expanding access to affordable housing
"While potentially negative for the GSEs from an underwriting and credit loss standpoint, this could enhance their policy role, which could be credit positive for Fitch's view of U.S. government support and senior unsecured creditors," the report said.