Are New Loan Limits Already At Risk?

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Posted To: MND NewsWire

The issue of Fannie Mae and Freddie Mac and their about-to-be-zero capital buffers has fallen off the radar in recent months, but apparently there is some movement behind the scenes. A little background: The GSEs were put into conservatorship in 2008 after each lost substantial amounts of money as loans defaulted. The two were given access to massive lines of credit at the Treasury Department, drew down around half of it, and have paid back more than they borrowed in the form of dividends (which have been rolling in by the billions of dollars since 2012). The agencies had been allowed to keep some capital in reserve in case they had an unprofitable quarter–a “capital buffer.” Under a revised stock purchase agreement negotiated by the Federal Housing Finance Agency (FHFA) and Treasury, that…(read more)

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