GSE profit sweep may end this month – Mnuchin

by Ryan Rose16 Sep 2019

The Treasury may end its decade-long sweep of Fannie Mae and Freddie Mac’s profits by the end of September, the agency’s head said.

Ever since the GSEs were taken into government conservatorship in the wake of the 2008 financial crisis, they have been required to send their quarterly net profits to the Treasury. Fannie and Freddie are currently only allowed to retain a combined $6 billion in capital, despite owning or guaranteeing mortgages worth $5.5 trillion.

Part of the Trump administration’s recently unveiled plan to overhaul housing finance reform involves allowing the GSEs to build their capital buffers before releasing them from government control. According to Treasury Secretary Steve Mnuchin, that plan could go into effect sooner rather than later.

“We’re actively negotiating an amendment to try to get it done by the end of the month,” Mnuchin said in an interview on CNBC’s Squawk Box last week.

The deal is being negotiated with the Federal Housing Finance Agency, which regulates the GSEs, CNBC reported. The Treasury, however, would still require a payment of some kind for continued government backing.

“What we’re negotiating is making sure taxpayers receive compensation for that,” Mnuchin said.

GSE reform has been a major Republican goal for years, with GOP lawmakers insisting that more private capital should enter the housing finance system. Some Democrats and housing advocacy groups, however, have expressed doubts about the Trump administration’s plan. The current plan, they warn, could reduce the number of Americans who would be able to qualify for a mortgage.

“For working-class Americans who want to buy a house, this could make it much more difficult to get a mortgage – and make the mortgage much more expensive,” Michael Calhoun, president of the Center for Responsible Lending, told NPR when the plan was announced.