Calabria Charts Path Forward for Fannie, Freddie

Federal Housing Finance Agency Director Mark Calabria today said he hopes to have Fannie Mae and Freddie Mac on a clear path toward ending conservatorship “by January 1 of next year.” Speaking at an industry conference, Calabria laid out his plan for reform of the two GSEs, which he said will be “driven, first and foremost, by their ability to raise capital.”

Among other things, this will involve addressing the net worth sweep, though he acknowledged that “it would likely take a very long time to build sufficient capital through retained earnings alone.” To that end, FHFA will explore alternative ways of raising capital, such as a through a public offering, he said.

In addition to raising capital for the GSEs, Calabria will also focus on reforming the agency as it prepares for Fannie and Freddie to transition out of conservatorship. The agency will continue working to launch the Uniform Mortgage Backed Security and will move forward with rulemakings “that establish sound, prudent standards regarding both the amount and the quality of capital,” including the proposed risk-based capital standard, he noted.

Calabria also previewed plans to propose several legislative reforms for consideration, including those that would grant FHFA the authority to issue additional GSE charters. While Calabria expressed willingness to work with Congress to pursue these reforms through the legislative process, however, he emphasized that “I’m not going to wait on Congress.”