November, the Federal Housing Finance Agency (FHFA) released a new regulatory
capital framework for Fannie Mae and Freddie Mac (the GSEs). At the time FHFA
said the final rule fulfills Congress’s
mandate in the Housing and Economic Recovery Act of 2008 that FHFA establish
risk-based capital requirements for the GSEs to ensure their safety and
soundness by increasing the quantity and quality of their regulatory capital
and reducing the pro-cyclicality of the aggregate capital requirements. This week the
agency submitted for comments a companion rule regarding liquidity requirements
for the two companies.

The agency says its rule is designed to ensure that the GSEs are a source of
strength for the mortgage market during downturns in the economy, and to
incentivize them to issue an appropriate and stable mix of debt over the long
term. The proposed rule takes into account the …

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