On June 27, 2017, NAR submitted letters to the U.S. Federal Housing Finance Agency (FHFA) Director, U.S. Treasury Secretary, members of the U.S. Senate Committee on Banking, Housing & Urban Affairs and U.S. House Committee on Financial Services, expressing concern related to the scheduled elimination of capital reserves held by Fannie Mae and Freddie Mac (Enterprises).
Specifically, NAR letters state to Congress and the banking agencies that in the absence of comprehensive housing finance reform, policymakers need to address the declining capital reserves at the Enterprises. One way to address this issue would be to create a Mortgage Market Liquidity Fund (MMLF) through legislation or under existing regulatory authority.
A portion of the Enterprises’ profits could be deposited into the fund, controlled by the FHFA Director, which would cover future losses due to market fluctuation as described above. The FHFA Director could release funds from this account to buffer against further U.S. Treasury involvement. As a result, some capital will be in place to avoid significant market disruptions and to continue to ensure that Americans have access to affordable mortgages
Under the terms of their agreements with the U.S. Treasury, the Enterprises’ capital reserves will decline to zero by January 1, 2018.