Fannie Mae-No Politics (FNMA)

[Wise Man]

BOOM. FnF have more room for Reserve release "Benefit for Loan Losses" with their Allowance for Loan Losses, ALLL (A Loan Loss Reserve for expected losses, required in the CECL accounting standard)
The Capital Rule states that there is a 0.6% of RWA limit in the amount of ALLL that can be Tier 2 Capital, for the calculation of the Total Capital that has to meet the Risk-Based Capital requirement.

The conservator has violated this rule in the ERCF tables, because FnF record the entire ALLL ending balance as Tier 2 Capital.
We've seen in FnF a reduction of the ALLL in the last two quarters and, likely, we will see more in the coming quarters or later on, though there is no obligation to bring the ALLL within the Tier 2 Capital limit.
Just the idea that the ALLL is overblown, makes the Capital ratios (for unexpected losses) shine.
But the shareholders rather see the reserve in the CET1 (Retained Earnings. Net Worth) than in ALLL (asset write-down: it assumes that the credit loss already occurred)
For instance, as of September 2023, Freddie Mac records the entire ALLL $7.4B ending balance as Tier 2 Capital, with data taken from the ERCF table and the FHEFSSA definition of Total Capital, TC = Core Capital + ALLL general reserve (not against specific assets) aka Tier 2 Capital, yet there is a $5.8B limit.
The plotters hate the FHEFSSA, to impose their "Finance for attorneys".
Mnuchin:

More detail:

FULL ALLL: TIER2 CAPITAL & OVERBLOWN
More Common Equity held in escrow.
After spotted,ALLL reduction 2 qtrs in a row,in favor of Retained Earnings(CET1,NW)
ALLL: Tier2 limit >0.6%RWA,though FHFA breaks its rule to conceal an outsized ALLL:$B
FNMA 8.7>8.1
FMCC 7.4>5.8#Fanniegate https://t.co/eV1mSgJ8QC pic.twitter.com/pVI3ISwH6B

— Conservatives against Trump (@CarlosVignote) November 15, 2023