Reserving Judgment
We have reviewed the FHFA’s OIG report and FHFA’s response to it yesterday regarding GSE accounting for 180-day delinquent underwater single-family mortgages. Reviewing the 2Qs and 10-Ks provides little insight into the likely impact of the toughened accounting standards FHFA promises eventually to bring forth, but we conclude that at the least the new rules will increase reserve requirements and, thereby, reduce earnings to the extent these rely on reserve recapture

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