The GSEs’ decision last night to charge a 50 bps refi fee epitomizes the impact of capital regulation: with private-sector capital incentives come private-sector capital reallocation actions. This fee is fueling a still more ferocious firestorm surrounding FHFA’s proposal, but we continue to expect FHFA to finalize it as quickly as possible to create a new GSE reality regardless of the election’s outcome.

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