The Federal Housing Finance Agency (FHFA) issued a notice of proposed rulemaking (NPR) requiring Fannie Mae and Freddie Mac (the Enterprises) to develop, submit, and maintain annual capital plans to the agency.
The intent of these plans is to protect taxpayers by ensuring the Enterprises properly assess their risks and maintain the appropriate level of capital.
“Today’s action is part of FHFA’s commitment to safety and soundness and protecting the housing finance system throughout the economic cycle,” FHFA acting Director Sandra Thompson said in a release.
“The proposed rule will help ensure that the Enterprises have robust systems and processes in place to monitor and maintain proper levels of capital. Adhering to a framework similar to other regulatory capital planning frameworks will better position the Enterprises, and the mortgage market, to withstand stressful economic environments.”
The NPR requires the capital plans to include:
- An assessment of the expected sources and uses of capital over the planning horizon.
- Estimates of projected revenues, expenses, losses, reserves, and pro forma capital levels under a range of the Enterprise’s internal scenarios, as well as under agency scenarios.
- A description of all planned capital actions over the planning horizon.
- A discussion of how the Enterprise will, under expected and stressful conditions, maintain capital commensurate with the business risks and continue to serve the housing market.
- A discussion of any expected changes to the Enterprise’s business plan that are likely to have a material impact on the Enterprise’s capital adequacy or liquidity.