Replies to post #449592 on Fannie Mae-No Politics (FNMA)

[navycmdr]

Timothy Howard commenting on this as well ...

jtimothyhoward ... FEBRUARY 14, 2018 AT 4:16 PM

Ms. Petrou most likely is referring to a discussion in the 10K about FHFA’s “Conservatorship Capital Framework,” which are new capital standards the company said FHFA directed it to implement in 2017 that include “specific requirements relating to risk on our book of business and modeled returns on our new acquisitions.”

In two places in the 2017 10K Fannie says, “In December 2017 and February 2018, FHFA, in its capacity as conservator, provided guidance relating to our guaranty fee pricing for new single-family acquisitions. FHFA’s guidance requires that we meet a specified minimum return on equity target based on the conservator capital framework. We must implement this target in the first quarter of 2018.” Then, when discussing guaranty fees on page 79, it adds this sentence: “We may be required to increase guaranty fees charged on some loans in order to meet this requirement.”
That’s not “utility regulation,” though. Utility regulation implies a maximum return on equity, which keeps guaranty fees down. Here FHFA is insisting on a minimum return on (notional) equity, which Fannie says may push some 2018 guaranty fees up.

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[Red Captain]

I have to agree with him on this one.

I think the regulated utility model is likely to be one that pleases all parties:

For conservatives, it finally does justice to the private shareholders who have been in this odd limbo for so long.

For progressives, it ensures a stable housing market with a view towards affordability.

For taxpayers, it minimizes their exposure to the risk of the mortgage insurance market.

Finally the for the economy, it removes some immense uncertainty and reduces risk to a minimum, at least in the mortgage industry.

The treasury itself can even make a profit, or keep a portion of its common shares (like golden share rule of 10% or so).