Capital requirements

A common concern in housing finance reactions has been the lack of accommodation for strategies routinely used to manage credit, rate and liquidity exposures.

Regulators will now accept feedback until Jan 16, 2024 — a six-week extension — concurrent with a Federal Reserve effort to gather additional information about the potential implications of the proposed capital changes.

This year’s stress tests examined 23 banks including JPMorgan Chase and Goldman Sachs, with the remainder of the firms on an “every other year” test cycle. The capital requirements for those remaining firms are unchanged from last year.

Federal Reserve Chairman Jerome Powell said the market dislocations of the past year resulting from the pandemic had changed the impact that the supplementary leverage ratio was having on the largest banks. After temporarily easing the requirement, the central bank is considering longer-term reforms.

Adolfo Marzol came to the agency after a stint at HUD and a 30-year career in the mortgage industry. He will depart on Dec. 18.

Fannie hasn't completed any credit risk transfers to private investors since the second quarter. Some experts worry the decision — likely spurred by the company’s concerns about a recent capital regulation — could put the mortgage giant on unsteady footing.

Vice Chairman of Supervision Randal Quarles said the agency wants to figure out why banks are holding on to capital that could be used more aggressively to respond to the pandemic.

The Financial Stability Oversight Council said the mortgage giants may need a bigger capital cushion than their regulator has proposed, but stopped short of designating them as “systemically important financial institutions.”

The Federal Housing Finance Agency's proposal could undermine the companies’ mission to support the housing market and penalize consumers in underserved communities, industry and consumer groups say.

The much-anticipated proposal, which would not go into effect until after Fannie Mae and Freddie Mac are privatized, reflects Director Mark Calabria’s aggressive efforts to get the companies on a strong financial footing.