$FNMA #FANNIEGATE
Objective 1.3: Preserve and conserve Enterprise assets while managing the conservatorships
Oversee the Enterprises’ implementation of capital plans to achieve regulatory capital requirements;
https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/FHFA_StrategicPlan_2022-2026.pdf
The final rule’s requirement to develop capital plans will allow the Enterprises to identify the amount of capital they need to raise to meet the ERCF’s requirements, and to consider the timing of when to raise capital, and what
Ensure Safety and Soundness The second strategic goal of the 2021 Scorecard was to ensure Enterprise safety and soundness by operating all aspects of the business in a safe and sound manner given limited capital cushions, with a prudent risk profile, and heightened risk management appropriate for conservatorship. These efforts were to include: • Developing appropriate Enterprise risk limits to ensure risk and complexity are reduced to levels more appropriate for regulated entities with limited capital cushions. (suspended) • Implementing capital management and capital planning capabilities that transition away from the existing Conservatorship Capital Framework to the Enterprise Regulatory Capital Framework (ERCF). • Work with FHFA to develop contingency plans that could be deployed as needed under FHFA direction
FHFA is continuing to take steps to strengthen the capital positions of the Enterprises so that they can fulfill their responsibilities throughout the economic cycle. Following the publication of a proposed rule in 2021, FHFA finalized important enhancements to the Enterprise Regulatory Capital Framework in February 2022. These enhancements provide the Enterprises with the necessary incentives to transfer credit risk to private investors, which will help protect taxpayers from the risks posed by the Enterprises. Furthermore, in the Spring of 2022, FHFA finalized additional capital planning requirements to ensure the Enterprises properly assess their risks and maintain the appropriate level of capital, and disclosure requirements to provide market participants with more information to assess an Enterprise’s risks and capital adequacy
Capital Management and Planning As the Enterprises continue to retain and build capital, capital planning provides the critical long-term framework for the Enterprises to manage their financial resources. This framework includes strategies to reach capital adequacy, while incorporating and aggregating other relevant factors from across the Enterprises’ business such as pricing and CRT issuance. Each Enterprise submitted a capital plan to FHFA on September 30, 2021 intended to support compliance with the ERCF, including efforts to build, maintain, and monitor capital adequacy. The elements of the Enterprises’ capital plans included: • Assessment of the expected sources and uses of capital, by projecting revenue, expenses, losses, loan loss reserves, earnings, and capital; • Description of planned capital actions over the planning horizon that identify actions management will take to enable an Enterprise to achieve and maintain regulatory capital requirements specified in the ERCF; • Principles and guidelines used for capital planning, issuance, usage, and distributions; and • Discussion of any expected changes to the Enterprises’ business plan that are likely to have a material impact on capital adequacy or liquidity. FHFA reviewed the capital plans and provided feedback to the Enterprises, including enhancements required to future capital plans submissions related to capital generation and regulatory capital metrics.
FHFA is actively engaging with the Enterprises in preparation for their 2022 capital plan submissions. Furthermore, in June 2022, FHFA finalized a rule related to capital planning to enhance the capital planning process.
Strengthening the Enterprises’ Financial Condition The FHFA Strategic Plan: Fiscal Year 2022-202651 states that as conservator, FHFA is focused on ensuring that each Enterprise builds capital and improves its safety and soundness. FHFA is also takting additional steps beyond building capital to ensure that the issues that led to the financial crisis will not recur. These steps include prioritizing the transfer of risk to private market participants, enhancing operational resiliency, strengthening governance and infrastructure, addressing human capital needs to build a deep reservoir of talent and experience, improving the Enterprises’ transparency, strengthening underwriting, and reviewing pricing and credit policies. FHFA’s priority and responsibility in the interim is to focus on the safety and soundness and mission requirements of both Enterprises.
https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/FHFA-2021-Annual-Report-to-Congress.pdf
In 2021, FHFA asked each Enterprise to submit a capital plan in substantially the same form as would be required under a rulemaking. The first capital plans were submitted to the Agency in September 2021. FHFA published the proposed rule in the Federal Register on December 27, 2021, and the rule was adopted in final form on June 1, 2022.
https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/FHFA-2022-PAR.pdf