Replies to post #617186 on Fannie Mae-No Politics (FNMA)

[kthomp19]

Yes, I would have like the follow up question...

The answer to that question is in HERA. At any capital classification other than "adequately capitalized", FnF have to submit capital restoration plans and FHFA has to approve them. See 12 USC 4615(a)(2) for example:

(2) Capital restoration plan

A regulated entity that is classified as undercapitalized shall, within the time period provided in section 4622(b) and (d) of this title, submit to the Director a capital restoration plan that complies with section 4622 of this title and carry out the plan after approval.

Similar language is in lower capital classifications.

That means that the BODs will not be free and clear to raise capital in any way they choose without FHFA's approval until they hit "adequately capitalized". That is, the point at which they would no longer need to raise capital! Ironic, huh?