The Office of Federal Housing Enterprise Oversight issued a notice of proposed rulemaking Thursday that would strengthen the formulas used to determine capital requirements at Fannie Mae and Freddie Mac.
The proposal would end the practice of the government-sponsored enterprises recording profits on foreclosed mortgages when determining capital levels. The agency said Fannie and Freddie can currently calculate their capital in a manner that would lead to a lower cushion.
OFHEO is also seeking to change how FHA insurance for single-family loans with a loan to value ratio of less that 78% is used in capital calculations. The agency said the change would prevent the GSEs from profiting on defaulted mortgages.
Once the NPR is published in the Federal Register, comments will be due within 90 days.
