CHLA Reacts to Fannie Mae Draw – 2/14/18

CHLA Reacts to Fannie Mae Draw — Congress Should Heed Director Watt’s Warning Not to React in Haste 

Contact: Scott Olson                                                    For Immediate Release

571-527-2601                                                             February 14, 2018

In the wake of Fannie Mae’s announcement that Fannie Mae will require a Treasury draw due to an accounting write-down of deferred tax assets, the Community Home Lenders Association (CHLA) called attention to FHFA Director Mel Watt’s speech almost exactly two years ago (February 18, 2016) – in which he warned that one of the two principal risks of a draw was a “legislative response adopted in haste without the kind of forethought it should be given.”

“FHFA Director Mel Watt got it exactly right when he said two years ago this week that one of the greatest risks of a draw would be a ‘legislative response adopted in haste,’” said Scott Olson, Executive Director of the CHLA.  Of course, Congress should adopt sound GSE reform legislation – but this artificial accounting draw is not a good reason to rush through a potentially bad bill just as a reaction to this development.”

[See page 6 of Director Watt's February 18, 2016 speech]:

https://www.fhfa.gov/Media/PublicAffairs/Pages/Prepared-Remarks-Melvin-Watt-at-BPC.aspx

CHLA points to a number of factors that show that the draw does not in any way serve as a justification for concluding that Fannie Mae (or Freddie Mac) are an imminent financial risk to taxpayers that justify adverse action, including:

* The “loss” is just an accounting loss, precipitated by the tax bill corporate tax reduction causing a write-down of Fannie’s deferred tax assets

* Fannie Mae has been continuously profitable; in fact the full year profits exceed the artificial tax loss

* There is nothing in today’s announcement that indicates there are any real financial problems for Fannie Mae on the horizon

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