Replies to post #756855 on Fannie Mae-No Politics (FNMA)

[familymang]

the Calabria capital rule determines the ongoing requirement which is NOT 2.5% and unless the rule is changed will NEVER be only 2.5%. The FHFA website (or UST) where the rule is defined has a base level of 2.5% then a certain percentage of other asset or capital categories which will fluctuate but will NEVER be 0. In fact, the calcuation for FNMA as of the last quarter of last year (I believe) turned out to be 4.4%!! The same quarter for FMCC turned out to be 3.3%. Again, unless the rule is changed it will NEVER be just 2.5%.

You seem to a have a fundamental misunderstanding how the ERCF works. The GSEs reported in their Q1 '23 10-Q’s their capital metrics under the ERCF.

First, there are two capital requirements, leverage capital (LC) and risk-based capital (RBC). Additionally, there are two applicable buffers, PLBA for the LC requirement and PCCBA for the RBC requirement. To exit conservatorship, the GSEs would need to hit both their respective capital requirements (LC + RBC), while the buffers are in place strictly to restrict "PAYOUTS" to shareholders (dividends or buybacks) and executives (compensation) on a floating schedule dependent on how much of the buffer is filled (see table below). The buffers are NOT required to be filled for the GSEs exit conservatorship.

LC: As of Q1, Fannie has an LC requirement of 2.5% with a PLBA buffer of 0.5% (2.5% to exit conservatorship, 3% to be fully capitalized without any restrictions on payouts). Freddie has an LC requirement of 2.5% with a PCCBA buffer of 0.3 (2.5% to exit conservatorship, 2.8% to be fully capitalized without any restrictions on payouts).

RBC: As of Q1, Fannie has an RBC requirement of 2.3% with a PCCBA buffer of 1.7% (2.3% to exit conservatorship, 4% to be fully capitalized without any restrictions on payouts). Freddie has an RBC requirement of 2.0% with a PCCBA buffer of 1.3% (2% to exit conservatorship, 3.3% to be fully capitalized without any restrictions on payouts).

You can confirm the figures above in the GSEs more recent Q filings (all the % figures are as a % of total adjusted assets).