The final rule makes certain changes to the proposed rule published June 30. That proposed rule was a re-proposal of the regulatory capital framework proposed in 2018. The final rule fulfills Congress's Housing and Economic Recovery Act of 2008 mandate that FHFA establish risk-based capital requirements for the government-sponsored enterprises. 

FHFA received 128 comments on the proposal, and hosted two webinars and listening sessions on the topic. 

The final rule is intended to ensure the safety and soundness of the enterprises by increasing the quantity and quality of their regulatory capital and reducing the pro-cyclicality of the aggregate capital requirements, FHFA said.

“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. Increased capital means that they can serve all Americans, especially low- and moderate-income families, throughout the economic cycle,” FHFA Director Mark Calabria said in a news release. “The final rule is another milestone necessary for responsibly ending the conservatorships.” 

However, the National Association of Realtors (NAR) had some concerns.
 

“While more analysis of the final rule is needed, NAR remains concerned the proposal could significantly raise costs for consumers, hamper the GSEs’ ability to support underserved markets and undermine reforms made over the last decade,” NAR President Charlie Oppler said in a statement. “NAR believes excess capital is no replacement for transparency and effective oversight.

“Fannie Mae and Freddie Mac have provided critical housing security throughout the COVID-19 pandemic, preserving American jobs and safeguarding an industry that represents nearly 20 percent of the U.S. economy,” he said. “With the GSEs now supporting three-quarters of all U.S. home purchases, NAR urges the FHFA to ensure Fannie and Freddie are providing much-needed market stability during this prolonged period of uncertainty and disruption. NAR thanks the FHFA for its work to reduce procyclical risk and we look forward to analyzing the proposal in more detail over the coming days, but we caution the Treasury and FHFA against taking drastic action with two institutions that are so vital to housing and the economy.”

The final rule is similar to the proposed rule in terms of overall structure and approach. As required by the proposed rule, an enterprise must maintain more than 4 percent tier 1 capital to avoid restrictions on capital distributions and discretionary bonuses.

FHFA made three notable changes to the risk-based capital requirements:

• 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. 

FHFA said the enhancements in the final rule ensure each enterprise's safety and soundness and its ability to fulfill its statutory mission across the economic cycle, particularly during periods of financial stress.