Fannie Mae-No Politics (FNMA)

[kthomp19]

What’s false about

RESTRICTION ON CAPITAL DISTRIBUTIONS.— page 2731
‘‘(1) IN GENERAL.—A regulated entity shall make no capital distribution if, after making the distribution, the regulated entity would be undercapitalized.?

Because "undecapitalized" is a specifically defined term in 12 USC 4614(a)(2).

4614(d) says that the FHFA Director must apply one of the four capital classifications in 4614 to FnF every quarter:

(d) Quarterly determination

The Director shall determine the capital classification of the regulated entities for purposes of this subchapter on not less than a quarterly basis (and as appropriate under subsection (c)).

But FHFA issued a regulation, 12 CFR 1237.3(c), which reads (emphasis added):

(c) Powers as conservator or receiver. The Agency, as conservator or receiver, shall have all powers and authorities specifically provided by section 1367 of the Safety and Soundness Act and paragraph (a) of this section, including incidental powers, which include the authority to suspend capital classifications under section 1364(e)(1) of the Safety and Soundness Act during the duration of the conservatorship or receivership of that regulated entity.

FHFA has decided that it doesn't have to assign any capital classification under 12 USC 4614 while FnF are in conservatorship.

That means FnF are not classified as "undercapitalized" as defined by 12 USC 4614, and therefore the restriction on capital distributions you quoted does not apply.