Regulator predicts delay in GSE capital rule due to pandemic

WASHINGTON — The Federal Housing Finance Agency became the first financial regulator Wednesday to announce a rulemaking delay resulting from the coronavirus outbreak.

FHFA Director Mark Calabria said the agency will push back the timeline for overhauling Fannie Mae and Freddie Mac's capital framework. The FHFA had committed to revising a previous plan developed under the Obama administration and issue a new proposal to establish risk-based capital requirements for the government-sponsored enterprises once they exit conservatorship.

But on the same day his agency had already announced a foreclosure halt because of the virus, Calabria said the public health crisis will complicate the notice and comment process for advancing the capital proposal. He noted that FHFA usually meets with external parties to discuss a proposal, but given the crisis, the “ability to hear from the public is compromised."

“We are delaying the opening of existing comment period until we have some certainty on what the current overall situation is,” said Calabria, speaking Wednesday on a conference call with members of the Exchequer Club. “We’re going to be cognizant of the fact that it may be very difficult for people to weigh in.”

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FHFA announced in November that it would re-propose the entire post-conservatorship capital framework originally put forward in June 2018 under former agency Director Mel Watt. Fannie and Freddie are now permitted to retain significantly higher levels of capital than they had when Watt originally issued the proposal.

Calabria had indicated just last month that FHFA would be re-proposing the rule “very soon.” But now, the agency is aiming to release its re-proposal sometime in the second half of May, he said.

Calabria also said the new proposal will largely resemble the previous one issued under Watt, and will have detailed risk-based capital standards that will be “a lot more detailed on the mortgage side than you see on the banking side.”

He also emphasized his goal of closing the gap between the GSEs and similar entities, noting that the mortgage giants have been able to grow sharply because they are highly leveraged.

“I believe that anybody who's got a federal charter, who's holding mortgages, should essentially be holding very similar capital, and I think this is particularly illustrated in today's environment where we are potentially in a stressed environment in the mortgage market,” said Calabria.