OFHEO Reaches Agreements With Fannie Mae, Freddie Mac On Subordinated Debt, Disclosures
September 5, 2005
WASHINGTON, D.C. — The Office of Federal Housing Enterprise Oversight (OFHEO), safety and soundness regulator for Fannie Mae and Freddie Mac today announced formal agreements with the companies, replacing voluntary commitments made by the companies in October 2000.
"These agreements represent an evolution from a set of voluntary actions to a set of enforceable commitments that will be overseen by OFHEO and will operate within a predictable supervisory framework," said OFHEO Acting Director Stephen A. Blumenthal.
Subordinated Debt: Each Enterprise commits to a program of issuing subordinated debt and will submit an issuance plan for review by OFHEO every six months. Each Enterprise will maintain, at four percent or more, the ratio of its qualifying subordinated debt plus core capital to the sum of its assets and .45 percent of its outstanding net mortgage-backed securities. Subordinated debt with remaining maturity of less than five years will receive partial credit.
Liquidity Management and Contingency Planning: OFHEO will oversee strong liquidity positions and adequate contingency planning at the Enterprises.
Public Disclosures: OFHEO will review public disclosure regarding subordinated debt, liquidity management, interest rate risk, credit risk and a risk rating by a nationally-recognized rating agency. In particular, OFHEO will seek to have the Enterprises more closely conform their duration measures.
OFHEO’s examination teams will supervise implementation of the agreements as part of their ongoing regulatory responsibilities.