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FHFA: The End of the Net Worth Profit Sweep is Imminent


September 19, 2019 - Dennis Hollier - [e-mail]



The Federal Housing Finance Agency and the Treasury Department are close to signing a letter agreement that will eliminate the net worth sweep by the end of September,

FHFA Director Mark Calabria told Inside Mortgage Finance this week.

The settlement will allow Fannie Mae and Freddie Mac to retain most of their earnings beginning with the third quarter.

The letter agreement is not a complete replacement of the preferred stock purchase agreement, Calabria said.

It’s a temporary expedient to end the sweep as quickly as possible.

The FHFA director pointed to the December 2017 agreement between his predecessor, Mel Watt, and Treasury Secretary Steven Mnuchin, which created the GSEs’ modest capital buffers. “There were no broader policy changes,” he said. “It was just, ‘Okay, you get to have a $3 billion capital buffer.’” For more details, see the new edition of Inside Mortgage Finance, now available online.