Page 30 - May-June 2018 GSE Report Flip Book

FANNIE MAE AND FREDDIE MAC MAJAYN-UAJRUYNE20210818
On June 24, the Washington Post editorial board wrote:
...FHFA presides over a duopoly that has long since repaid the bailout and does observe tighter underwriting standards than it did before the crisis. In December, Treasury Secretary Steven Mnuchin allowed Fannie and Freddie to retain $3 billion in earnings each, to prevent technicalities in the 2017 tax bill from wiping out their capital. Mr. Watt, who was appointed to his five-year
term by President Barack Obama in 2014, tried to nudge Fannie and Freddie toward the future by announcing that he would soon propose a new capital requirement for the agencies. Still, FHFA
is quietly letting them guarantee slightly larger and riskier mortgages. The specter of another politically embarrassing bailout has been banished, but nothing fundamental has been achieved, nor will it be before the November election. With the Trump administration now on record, however, maybe 2019 will finally be the year for reform. (Washington Post, 06/24/18)
In a ratings outlook for Fannie Mae and Freddie Mac, S&P Global Ratings wrote:
We do not believe [the administration’s GSE reform] proposals are likely to be enacted within the coming two years. The OMB’s proposal includes several principles discussed in prior congressional attempts to redefine the role of the housing-related entities, notably the 2013 bipartisan bill sponsored by Sens. Corker and Warner that failed to secure the requisite broad support from lawmakers.
...We do not see substantial evidence that the OMB’s proposals are likely to be enacted within the coming two years. The proposed changes to F&F do not provide much detail nor specify a timeframe for implementation. We believe the proposed changes would necessitate congressional approval, and we think it is unlikely that Congress would bring these proposals to a vote before the November mid-term congressional elections.
...Unless and until we come to believe that one of these reform initiatives will garner political support broad enough to be likely to be enacted within the coming two years, our ratings on F&F are unlikely to decouple from our ratings on the U.S. government.
As a result, S&P’s outlook and ratings for Fannie Mae and Freddie Mac remain unchanged. If the administration’s reform proposal were to pass as currently written, S&P said it would likely lower its AA+/A-1+ ratings on Fannie and Freddie’s senior debt securities. (HousingWire, Kelsey Ramirez, 06/25/18)
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