On Wednesday, November 18, the Federal Housing Finance Agency (FHFA) issued the final rule on the risk-based capital requirements for Fannie Mae and Freddie Mac (the Enterprises).
According to FHFA’s statement, “the final rule is substantively similar to the proposed rule in terms of overall structure and approach. As required by the proposed rule, an Enterprise must maintain tier 1 capital in excess of 4.0 percent to avoid restrictions on capital distributions and discretionary bonuses.”
FHFA has made three notable changes to the risk-based capital requirements in addition to refinements which include:
- Increased capital relief for credit risk transfers (CRT);
- Reduced capital requirements for single-family mortgage exposures subject to COVID-19 related forbearance; and
- Increased the exposure level risk-weight floor for single-family and multifamily mortgage exposures to 20 percent.
In the release, FHFA Director Mark Calabria noted, “Fannie Mae and Freddie Mac have a mission to serve the American housing market during good times and bad. After considering all the comments on the proposed rule, and the Financial Stability Oversight Council’s review of the secondary mortgage market, FHFA is confident that the final rule puts Fannie Mae and Freddie Mac on a path toward a sound capital footing,”
FHFA received a total of 128 comment letters, including comments submitted by NMHC and NAA found here. NAA and NMHC will review the final rule to determine the extent, if any, of the inclusion of suggested modifications and their impact to the multifamily industry.