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Fannie-Freddie Might Not Sell Shares Until 2022, Watchdog Says

Fannie-Freddie Might Not Sell Shares Until 2022, Watchdog Says

FHFA Director Mark Calabria said the agency will likely have a rule for capital requirements before Fannie, Freddie go to market.

(Bloomberg)—Fannie Mae and Freddie Mac’s regulator said the mortgage giants will likely be ready for public offerings by 2021 or 2022, a key step toward their exits from government control.

Federal Housing Finance Agency Director Mark Calabria, speaking Wednesday at a housing finance policy conference in Washington, said he expects that his agency will have a rule dictating capital requirements in place before Fannie and Freddie go to market. He said they may face a period where they operate under a consent decree in which they technically exit conservatorship but aren’t free of the government’s grip.

“If all goes well, 2021, 2022 we will see very large public offerings from these companies,” Calabria said at an event sponsored by the American Association of Residential Mortgage Regulators and the Conference of State Bank Supervisors. “The consent decree will be able to give that window where they can go to market, do an offering and still operate under a way where we’ve got some prudential safeguards.”

Calabria said that under his timeline, the companies could exit U.S. control by 2022 or 2023.

While Calabria has stressed his work is not “calendar-driven, but process-driven” the timeline he laid out may disappoint investors who were hoping that the companies would be freed sooner. It also means that prospects for housing-finance reform as envisioned by Trump administration appointees probably hinges on the president’s re-election next year. The Treasury Department is required to sign off on a number of changes to allow for Fannie and Freddie to exit conservatorship.

Fannie fell 5.6% to $3.03 as of 12:23 p.m. in New York trading, while Freddie slipped 2.7% to $2.87. The shares were up Wednesday before Calabria’s comments.

Whether Fannie and Freddie can be freed under his timeline depends on market support for the move, Calabria said. He added that it’s up to the FHFA to set the benchmarks for freeing the companies, but up to them to meet those parameters.

Calabria has previously said that while progress is being made on ending U.S. control, there is still a lot of work to be done. He has said the FHFA hopes to select a financial adviser soon to provide advice on an exit path, and that he also expects the companies to seek their own advisers.

He said that he hopes to have an update on plans for setting Fannie and Freddie’s capital structure soon. He still hasn’t specified whether he plans to start from scratch or build upon the rulemaking initiated by his predecessor at FHFA.

To contact the reporter on this story: Elizabeth Dexheimer in Washington at [email protected].

To contact the editors responsible for this story: Jesse Westbrook at [email protected]

Gregory Mott

© 2019 Bloomberg L.P.

TAGS: Multifamily
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