Capital requirements

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.

The mortgage industry will be looking for answers when Treasury and HUD unveil reports on housing finance reform, but the Trump administration’s plans could also raise a whole new host of questions.

EJF Capital is launching its seventh securitization of subordinated bank debt, via a CDO vehicle that allows smaller banks to raise capital more cheaply and efficiently for regulatory purposes.

In his first public policy speech as director of the Federal Housing Finance Agency, Mark Calabria stressed that Fannie Mae and Freddie Mac will have to raise significant capital via a public offering and take other steps in order to escape government control.

Mark Calabria, who could be confirmed as early as this month, is expected to focus on changes to Fannie Mae and Freddie Mac’s conservatorships to let the mortgage giants keep more of their profits.

As policymakers consider administrative reforms to Fannie and Freddie, they must address the problem of capital arbitrage to avoid overleveraging the mortgage system.

The revised blueprint by Moelis & Co. LLC incorporates a pending regulatory capital plan for the mortgage giants.

“We have actually discouraged banks from innovating,” FDIC Chairman Jelena McWilliams said in announcing a move that other agencies have made.

Whereas most regulators appointed in the Trump administration are focused on rolling back the post-crisis framework, Nellie Liang helped create it.

Fannie Mae and Freddie Mac may need to tap into U.S. Treasury funds when they adopt CECL, a new accounting rule that makes companies set aside money upfront for expected loan losses.

The GSEs are on their way to paying back the money they owed the government under the original bailout deal made at the height of the financial crisis, making 2018 an opportune time for an overhaul of the housing finance market.

The Treasury Department is expanding its calls for overhauling regulation of the financial services sector, this time focusing on changes to the most significant rules surrounding securitization and derivatives.

The commitments were the residue of restrictions that were placed on Ally in the wake of government bailouts in 2008 and 2009.