Fannie Mae-No Politics (FNMA)

[navycmdr]

Reassessing the State of GSE Reform. Former Fannie CFO Takes Aim

Wednesday July 3, 2019 - [e-mail]



As the Trump administration’s push for housing-finance reform approaches several key milestones, analysts and industry observers have begun to chime in on its prospects for success. Much of that commentary has ranged from cautious to skeptical.

Probably the most scathing remarks come from Tim Howard, a former CFO at Fannie Mae who worked for the mortgage giant during the pre-conservatorship days.

In a recent blog posting, Howard took the Federal Housing Finance Agency and its new director, Mark Calabria, to task for the agency’s final capital rule, scheduled for release within the next few weeks. Howard focused most of his criticism on the agency’s contention that the GSEs should hold “bank-like” amounts of capital – an idea touted by Calabria.

Howard quoted Calabria saying his objective is to “have capital levels at Fannie and Freddie that are comparable to other large financial institutions.” Calabria also noted 4.5% capital is “kind of in the neighborhood of where we’re looking at.” But according to Howard, there is no economic reason the GSEs should hold capital comparable to large commercial banks.

“Fannie and Freddie are not multi-product and multinational lenders,” he wrote. “They are mono-line insurance companies, limited to a single asset type – residential mortgages – whose historical credit loss performance has been dramatically better than banks.”