A new policy paper
from the Urban Institute (UI) looks at the recent amendments to the senior
preferred stock purchase agreement
(PSPA) agreed to by outgoing Treasury
Secretary Steven Mnuchin and Mark Calabria, Director the Federal Housing
Finance Agency (FHFA) on January 14, 2021. The PSPA governs Treasury’s financial
relationship with the GSEs Fannie Mae and Freddie Mac. The changes were
intended to enable the eventual release of the GSEs from conservatorship by allowing
them to build capital
and provides milestones for their release. The changes also
serve to constrain the GSEs’ activities well after their release by putting
limits on their business practices including limits on the amount of “high risk”
mortgages they can purchase as well as those that finance second homes or
investor properties. It also caps the use of the cash window.


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