Fannie Mae-No Politics (FNMA)

[FOFreddie]

We should have a 5 year forward looking timeline into any potential capital raises by May 20th. The Boards of FNMA and FMCC must have considered and approved these plans before the May 20th deadline

https://www.fhfa.gov/SupervisionRegulation/Rules/Pages/Capital-Planning-and-Stress-Capital-Buffer-Determination--Final-Rule.aspx

Excerpt:

On December 27, 2021, FHFA published in the Federal Register a notice of
proposed rulemaking (the proposal or proposed rule) seeking comments on FHFA’s
proposal to require each Enterprise to submit annual capital plans to FHFA and provide
prior notice for certain capital actions. The proposal incorporated the determination of the
stress capital buffer from the ERCF1 into the capital planning process. The requirements
in the proposal were consistent with the regulatory framework for capital planning for
large bank holding companies. FHFA is now adopting this final rule as proposed.
1 86 FR 73187 (Dec. 27, 2021).
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The final rule’s requirement to develop capital plans will allow the Enterprises to
identify the amount of capital they need to raise to meet the ERCF’s requirements, and to
consider the timing of when to raise capital, and what types of capital to raise. The final
rule, like the ERCF, is intended to provide a stable regulatory framework for the
Enterprises for an extended period, including after they achieve adequate capitalization
under the ERCF.
II. Overview of the Final Rule
After carefully considering the comments on the proposed rule, and as described
in this preamble, FHFA is adopting the capital planning requirements and stress capital
buffer determination as proposed. FHFA continues to believe that the Enterprises should
have robust systems and processes in place that incorporate forward-looking projections
of revenue and losses to monitor and maintain their internal capital adequacy.
Furthermore, each Enterprise should operate with an amount of capital that is
commensurate with each Enterprise’s risk profile. FHFA also believes that the stress
capital buffer determination should be part of the capital planning process.
Specifically, the final rule will require an Enterprise to develop and maintain a
capital plan, which the Enterprise must generally submit to FHFA by May 20 of each
year, after it has been reviewed by the Enterprise’s board of directors or a designated
committee thereof. The plan must contain certain mandatory elements, including an
assessment of the expected sources and uses of capital over a planning horizon that
reflects the Enterprise’s size and complexity, assuming both expected and stressful
conditions. This includes the Enterprise’s internal baseline scenario and internal stress
scenario, as well as additional scenarios that may be provided by FHFA. The planning
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horizon is at least five years for the Enterprise’s scenarios and at least nine consecutive
quarters for the FHFA scenarios. The capital plans also must include any planned capital
actions and consider the regulatory capital buffers.
The final rule includes the factors that FHFA will consider in reviewing a plan,
including its comprehensiveness and reasonableness given the assumptions and analysis
underlying the plan and the robustness of the Enterprise’s capital adequacy process. A
plan must be resubmitted if there is a material change in the Enterprise’s risk profile,
financial condition, or corporate structure. FHFA also may require an Enterprise to
resubmit its capital plan if the plan is incomplete or FHFA determines resubmission is
necessary to monitor risks to capital adequacy. In general, an Enterprise must receive
prior approval from FHFA to make a capital distribution, if the distribution would occur
after an event that requires a resubmission. There is also a post-notice requirement for
certain capital distributions.
In addition to requiring a capital plan, the rule incorporates the stress capital
buffer from the ERCF into the capital planning process and makes the necessary
conforming amendments to the ERCF. After FHFA notifies the Enterprise of its stress
capital buffer each year, the Enterprise must adjust its planned capital distributions to be
consistent with the capital distribution limitations effective under the new stress capital
buffer. The final rule changes the stress capital buffer’s calculation method slightly by
considering an Enterprise’s planned common stock dividends for the fourth through
seventh quarters of the planning horizon rather than the ERCF direction to use each of the
nine quarters of the planning horizo