Fannie Mae-No Politics (FNMA)

[Wise Man]

No. The Restriction on Capital Distributions is when it makes FnF be undercapitalized in general. It doesn't say "the regulated entity would become classified Undercapitalized pursuant to section 1364 (a)(2)".
And it starts with "IN GENERAL".
Besides, it's set forth in the FHEFSSA with an amendment of HERA in its Chapter: "Prompt Corrective Action".
So, as always, it isn't HERA as you claim, but the FHEFSSA.
The Conservatorship was imposed because it's laid out in the SEC. 1367. AUTHORITY OVER CRITICALLY UNDERCAPITALIZED REGULATED ENTITIES.
(a) APPOINTMENT OF THE AGENCY AS CONSERVATOR.
So, the preservation of capital is of supreme importance and the restriction on capital distribution is a prompt corrective action for a reason. That's why the dividend payment (a distribution of Earnings -Core Capital-) was suspended on day one. It was not imposed on a whim by the conservator, as the low profile attorneys seem to suggest.
And this is why a Non-Cumulative dividend JPS is recorded in the Core Capital (loss-absorbing capacity capital related). And why a JPS gets a higher dividend rate than the interest rate on similar obligations from the same issuer (risk of dividend suspension). Whereas the SPS are not regulatory capital.
It's pathetic to see how you, another attorney, cite khtomp19 as source of your statement, instead of citing the law or posting a screenshot of the law.

Kthomp has explained this before. And I think this explanation is correct.

You should have read my reply to khtomp19 rebuking his statement in the post that you are referring to, and I would have saved repeating it with this post.

Finally, there is Timothy Howard, who claimed that the Restriction on Capital Distributions isn't biding during Conservatorship because the FHFA suspended the Capital Classifications on day one, and the Restriction was placed by HERA at the end of the section Capital Classifications.
The same restriction in the U.S. banks' FDI Act, section Prompt Corrective Actions.