The U.S. Department of the Treasury and the Federal Housing Finance Agency (FHFA) have announced amendments to the Preferred Stock Purchase Agreements (PSPAs) with Fannie Mae and Freddie Mac. These changes aim to ensure an orderly release of these government-sponsored enterprises (GSEs) from conservatorship and align with existing practices.
A significant amendment is the restoration of Treasury’s right to consent to a release of the GSEs from conservatorship, consistent with PSPAs from 2008 to 2021. This also includes Treasury’s right to consent to any FHFA action that may initiate a receivership for the GSEs.
In addition, a side letter from FHFA outlines plans for public input before any GSE is released from conservatorship, except through receivership. The public will be invited to comment on potential impacts on the housing market and the GSEs. “This process will increase transparency to the public and key stakeholders,” according to FHFA.
Before consenting to a release, Treasury will consult with the President after considering FHFA’s recommended approach based on public input. The Financial Stability Oversight Council will also be briefed on this input.
The agreements include technical updates such as corrections in definitions and elimination of certain business restrictions suspended since September 14, 2021. However, they do not affect capital retention or dividend payments under senior preferred shares issued by the GSEs to Treasury. The expiration date for warrants held by Treasury remains unchanged but may be extended in future discussions.
For further details, refer to the letter agreements and side letter available online.
