Oh Glen,
You've surely heard that the admin wants to keep mortgage rates as low as possible. Bessent said that the Treasury's top priority is to ensure that any release from conservatorship does not raise mortgage rates. And on September 11, Lutnik said that everything possible will be done to keep mortgage rates as low as mathematically possible. This goal has been heard from all sides of the administration since January. And you haven't heard about it? Shrug. 😉
The last time we talked about this, you understood that the funding commitment is valuable to Fannie and Freddie. You just weren't sure whether an increase to $445 billion would be valuable enough to make up for the then missing 20.1%. Believe me when I tell you that it's worth more than 50%. The Treasury's backing is the most valuable asset Fannie and Freddie have for their business model. And if capital requirements can also be lowered, this will reduce ROE so drastically that a few more percentage points will be added to the value of the companies. Then even mortgage rates can be lowered, and the companies will still make fat profits despite lower g-fees.
When the admin is going to do what Lutnik just said, then deeming the SPS as repaid is the one and only way. And you can be sure: He knows it, Bessent knows it, and Trump knows it. And Pulte is smart enough to get it. Bessent will give up the SPS and tell Pulte to lower the cap requirements - as he already did at a FED meeting last month.
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