The Federal Housing Finance Agency (FHFA) and the U.S. Department of the Treasury have announced amendments to the Preferred Stock Purchase Agreements (PSPAs).
FHFA and Treasury have agreed to delete the provisions of the PSPAs that were suspended pursuant to their September 14, 2021 Letter Agreement and to make other modifications. These changes provide Fannie Mae and Freddie Mac (the GSEs) with more flexibility to better support access to homeownership and rental housing. In addition, the amendments clarify that the GSEs must meet the capital requirements established by FHFA as amended over time. The amendments also include technical changes or clarifications applicable to the GSEs’ financial reporting.
President and CEO of the Mortgage Bankers Association (MBA), Bob Broeksmit, CMB, said: “MBA believes strongly that any efforts to remove Fannie Mae and Freddie Mac (the GSEs) from their federal government conservatorships must fully consider the impact on single-family and multifamily housing markets and overall financial stability. This includes the critical move that Congress establishes an explicit federal backstop for mortgage-backed securities.”
At the time the original PSPAs were executed in September 2008, written Treasury consent was required before the conservatorships could be terminated. The new amendments restore that consent right. FHFA and Treasury also agreed that the path to ending the conservatorships should be based on the financial condition of the GSEs and potential impact of termination on the housing market. Accordingly, FHFA and Treasury have agreed to a process for eventual public input on termination options and potential impacts, which is addressed in a separate side letter between the agencies.
“The Enterprises play a vital role in the national housing finance system,” said FHFA Director Sandra L. Thompson. “Today’s announcement will reassure stakeholders that the Enterprises’ eventual release from conservatorship will follow a methodical process intended to minimize disruption to the housing and financial markets.”
The process set forth in the side letter, which applies to terminations other than receivership and includes seeking public input, briefing the Financial Stability Oversight Council (FSOC), and analyzing the market impact of different paths to ending the conservatorships before seeking Treasury consent, is intended to facilitate an orderly termination of the conservatorships and to ensure that the impact of the termination on the GSEs, the housing market, and U.S. financial stability is considered.
“Conservatorship was never intended to be perpetual, and we support efforts toward the GSEs’ release,” added Broeksmit. “We appreciate the rationale behind today’s changes to the PSPAs, which are designed to foster transparency across government agencies, share market impact analysis, and give appropriate time for market participants to provide feedback on proposed reforms. The GSEs are integral to homeownership and rental housing, and the transition to a post-conservatorship era must be done the right way with an ample timeline. MBA stands ready to work with the incoming Trump administration at the White House, Treasury Department, and FHFA—and also with the Congress—to ensure that happens.”
