Fannie Mae

House Hearing on GSEs and Housing Finance Reform

On September 15, the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises of the House Financial Services Committee held a hearing on the status of Fannie Mae and Freddie Mac and with respect to housing finance reform. Treasury Assistant Secretary for Financial Institutions Michael S. Barr confirmed the Administration’s commitment to delivering a comprehensive proposal for reform of Fannie Mae, Freddie Mac, and the broader housing finance system to Congress by January 2011.
Edward J. DeMarco, Acting Director of the FHFA also called for legislation to restructure and strengthen the nation’s housing finance system and to resolve the Fannie Mae and Freddie Mac conservatorships. Both emphasized the importance of a transition period to avoid further disruptions in the housing finance system that could occur if the GSEs were to suddenly exit the market.

FHFA Issues Subpoena for Private-Label MBS Documents

On July 12, the FHFA, as conservator of Fannie Mae and Freddie Mac, announced that it has issued 64 subpoenas requesting documents related to private-label MBS in which both Fannie and Freddie are invested.  The goal of receiving the documents is to enable the FHFA to determine whether any parties to the MBS are liable to Fannie or Freddie for certain losses suffered on the MBS.  Any recouped funds will be used to offset payments made to Fannie and Freddie by Treasury. FHFA Release.

FHFA Proposed Rule on Fannie, Freddie and FHLB Conservatorship

On July 6, the FHFA announced a proposed rule to codify the terms of conservatorship and receivership operations for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, pursuant to the Housing and Economic Recovery Act of 2008.  Comments to the proposed rule may be submitted no later than 60 days after date of publication in the Federal Register. Release. Proposed Rule.

Treasury Update on GSEs and Housing Programs

On December 24, Treasury announced that it amended the Preferred Stock Purchase Agreements (PSPAs) with Fannie Mae and Freddie Mac, allowing the cap on Treasury’s funding commitment to increase and providing more flexibility for Fannie and Freddie to meet the requirement that they reduce the size of their retained mortgage portfolios. Treasury also announced that several programs established under the Housing and Economic Recovery Act of 2008 would be terminated by the end of 2009. Treasury Press Release. Fannie Mae PSPA Amendment. Freddie Mac PSPA Amendment.

GSE Developments

The federal bank and thrift regulatory agencies today announced that they are seeking comment on a proposal to permit banking organizations to assign a 10% (currently 20%) risk weight to claims on or guaranteed by Fannie Mae and Freddie Mac, including all credit exposures, such as senior and subordinated debt and counterparty credit risk exposures, but not including preferred or common stock. The FDIC will accept comments through November 26.  FDIC Release.

 Fannie Mae announced on October 29 that it has determined to take a valuation allowance against its deferred tax asset in an amount that is yet to be determined but which is likely to be substantially all of the value of the deferred tax asset as of September 30.  Fannie Mae Release

The Emergency Economic Stabilization Act provided banks and certain financial institutions ordinary treatment for gains and losses on direct investments in preferred stock of Fannie Mae and Freddie Mac. On October 29, the IRS issued Rev. Proc. 2008-64, which provides banks and certain other financial institutions the benefit of ordinary treatment on gains and losses that they are experiencing on certain indirect investments in this preferred stock.  IRS Rev. Proc. 2008-64.

Tax Treatment of Fannie and Freddie Preferred Stock

Section 301 of the Emergency Economic Stabilization Act allows certain banking organizations to change the character of losses on certain holdings of Fannie Mae and Freddie Mac preferred stock from capital losses to ordinary losses for federal income tax purposes. The federal banking and thrift regulatory agencies announced that these banking organizations can recognize the economic benefit of these changes in tax treatment in the third quarter of 2008 for regulatory capital purposes.  FDIC Press Release.