Capital requirements

Director Mark Calabria, who abandoned the Fannie and Freddie capital proposal written by his predecessor, said he expects a revised framework to be ready “very soon.”

FHFA Director Mark Calabria said the health crisis will complicate the release of a proposal establishing new capital requirements for Fannie Mae and Freddie Mac.

If banks are unable to weather the economic fallout from the outbreak, calls for more dramatic reforms could get louder.

Banks may be protected from a direct hit, but they have invested in vehicles that include such loans, potentially exposing them to defaults.

With policymakers focused on ending Fannie Mae and Freddie Mac’s conservatorship, their regulator is reorganizing key units and adding staff to position itself for the long term.

The regulator said the investment bank and financial services company will help in the process of strengthening Fannie Mae and Freddie Mac’s capital standing for their eventual exit from conservatorship.

Federal Housing Finance Agency Director Mark Calabria discussed the possibility of having Fannie Mae and Freddie Mac operate under a consent order to allow the government-sponsored enterprises to be able to raise capital.

A risk-based capital rule for Fannie Mae and Freddie Mac is expected to top the agenda in 2020 as the companies’ regulator executes plans for their release into the private sector.

Allowing the mortgage giants to retain profits resolves a short-term capital shortfall, but how much capital they would need after exiting conservatorship is still the bigger question.

The proposed reforms of Fannie Mae and Freddie Mac have gotten all the attention, but the administration also wants to scale back the Federal Housing Administration, expand its capital cushion and adopt risk-based pricing. Some of the ideas have former agency officials concerned.