Mortgage giants Fannie Mae and Freddie Mac will have to hold hundreds of billions of dollars of capital to absorb possible losses, their federal regulator decided yesterday, the Wall Street Journal reported. The decision by the Federal Housing Finance Agency is a key step in efforts to return the two companies to private ownership. They were taken over by the government during the 2008 financial crisis in a process known as conservatorship. “The final rule is another milestone necessary for responsibly ending the conservatorships,” FHFA Director Mark Calabria said in a statement. “FHFA is confident that the final rule puts Fannie Mae and Freddie Mac on a path toward a sound capital footing.” But the decision sets a high hurdle for the companies. Based on their combined size earlier this year, Fannie and Freddie would have to hold about $283 billion. At present, they hold roughly $35 billion and would need to make up the difference through a combination of retained earnings and possible future stock sales. The FHFA is seeking to put the companies — which guarantee about half the $11 trillion mortgage market — on a sound financial footing before returning them to private ownership. It is unclear if there is enough time to carry out those plans ahead of the Jan. 20 inauguration of President-elect Joe Biden, who is considered unlikely to continue the effort.
