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New Fannie/Freddie Requirements May Penalize High-Risk Borrowers

Posted To: MND NewsWire

Three researchers from the Urban Institute (UI) recently analyzed the new capital standards rule proposed by the Federal Housing Finance Agency (FHFA) for Fannie Mae and Freddie Mac (the GSEs.) The proposed rule includes two alternative leverage ratio proposals. Under the first, the GSEs would be required to hold capital equal to 2.5 percent of total assets and off-balance sheet guarantees, the second, to hold capital equal to 1.5 percent of trust assets and 4 percent of non-trust assets. The second approach differentiates between the greater funding risks of non-trust assets and the lower funding risks of the trust assets while increasing the capital requirements for both relative to the current statutory requirements. On Thursday we summarized their analysis of how well the rule might align...(read more)