Action Needed to Protect Consumers and Housing Markets
Washington, D.C. (Feb. 17, 2016)—A trio of national associations representing small mortgage lenders and community banks today urged the Federal Housing Finance Agency to suspend payment of Fannie Mae and Freddie Mac dividends—which amounts to a sweep of their earnings directly to the U.S. Treasury—to protect consumers and housing markets. In a letter to FHFA Director Mel Watt, the associations urged the agency to allow these government-sponsored enterprises (GSEs) to build a capital buffer and avoid a Treasury draw under the GSEs’ Preferred Stock Purchase Agreements, out of a concern that the capital-deficient GSEs could further constrain credit to home buyers.
“We are writing to you in your capacity as Fannie Mae and Freddie Mac’s conservator and safety and soundness regulator, to urge suspension of the payment of dividends on the senior preferred stock held by the U.S. Treasury,” the associations wrote in the joint letter. “The purpose of this suspension would be to allow the GSEs to build a capital buffer to deal with potential earnings volatility driven by external economic developments rather than by actions or missteps by the GSEs.”
Noting the possibility that changes in interest rates could result in the GSEs reporting a loss due to non-cash hedging charges, the joint letter urges FHFA to “consider reserving any fourth quarter 2015 net positive earnings onto the books of the GSEs, as well as moving forward with the creation of a plan for the GSEs to rebuild capital—something FHFA has the absolute authority to do, in its sole discretion.”
The letter was sent jointly by the Community Home Lenders Association (CHLA), the Independent Community Bankers of America (ICBA) and the Community Mortgage Lenders of America (CMLA).
The Independent Community Bankers of America®, the nation’s voice for more than 6,000 community banks of all sizes and charter types, is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education and high-quality products and services.