TREASURY/TRUMP AS PRESIDENT: “Mortgage-finance giants Fannie Mae and Freddie Mac will retain some of their quarterly earnings as part of an agreement between the Trump administration and their regulator to allow the companies to build a small buffer against future operating losses.
Under the agreement, announced Thursday [12-21-17] by the Treasury Department and the Federal Housing Finance Agency, the companies will be permitted to reserve $3 billion in capital. The move is designed to protect against losses coming from ‘fluctuations in income in the normal course of each enterprise’s business,’ said FHFA Director Mel Watt…
The Treasury agreed to modify the terms of the U.S. backstop of the companies after discussions initiated earlier this year at the request of FHFA, said senior Treasury officials on Thursday.
Fannie and Freddie have reported strong profits in recent years because they have dramatically restructured their underlying business of guaranteeing mortgages that are bundled into securities and sold to investors. They have raised the fees they charge lenders and are guaranteeing higher-quality loans than they did before the housing bubble burst in 2007.”
-Nick Timiraos and Andrew Ackerman, “Treasury Will Allow Fannie, Freddie to Retain Small Capital Buffer,” The Wall Street Journal online, Dec. 21, 2017 10:17am