Treasury, FHFA Allow GSEs to Retain $45B in Earnings

Fannie Mae and Freddie Mac will retain a total of $45 billion in earnings under a new agreement reached with the Treasury Department and the Federal Housing Finance Agency. The agreement—which will allow Fannie to retain $25 billion and Freddie to retain $20 billion—is intended to help the GSEs rebuild capital by ending the “net worth sweep,” a critical step toward removing the enterprises from conservatorship that was outlined earlier this year in the Treasury Department’s housing reform plan.

As part of the agreement, Treasury’s liquidation preferences for its Fannie Mae and Freddie Mac preferred stock will gradually increase until they reach $22 billion for Fannie and $17 billion for Freddie. “FHFA commits to working with Treasury in the coming months to amend the share agreements and further advance broader housing finance reform,” FHFA Director Mark Calabria said. “These reform goals include limiting the government’s role in housing finance, increasing marketplace competition, focusing on affordable housing, and sustainable homeownership.”