Agreement has been reached between the Federal Housing Finance Agency (FHFA) and the Department of the Treasury to reinstate a $3 billion capital reserve amount under the Senior Preferred Stock Purchase Agreements (SPSA) for Fannie Mae and Freddie Mac beginning in the fourth quarter of 2017.  The change will be effective for the dividend reflecting the GSEs' financial condition as of the fourth quarter of 2017 which ends on December 31. 

An amendment to the SPSA agreement in 2012 changed the dividend payment from the GSEs to Treasury from a percentage of the GSE's net quarterly profits as originally agreed, to a sweep of all profits less a capital reserve amount that steadily decreased.  The reserve was due to hit zero after the 4th quarter 2017 payment.

Watt released an announcement Thursday morning regarding the agreement which says in part, "While it is apparent that a draw will be necessary for each Enterprise if tax legislation results in a reduction to the corporate tax rate, FHFA considers the $3 billion capital reserve sufficient to cover other fluctuations in income in the normal course of each Enterprise's business.  We, therefore, contemplate that going forward Enterprise dividends will be declared and paid beyond the $3 billion capital reserve in the absence of exigent circumstances."

Letters from Treasury Secretary Steven T. Mnuchin to FHFA Director Melvin Watt, confirm Treasury's commitment to provide the GSEs "immediately available funds in an amount determined from time to time as provided in the Agreement, but in no event in an aggregate amount exceeding $100,000,000,000." In return for the funding, one million shares of senior preferred stock in the GSEs which were transferred to the Treasury in 2008.  The amount of the commitment was subsequently altered several times by revisions to the initial agreement.