An agreement has been struck for the government-sponsored enterprises to maintain a small capital buffer. While the modifications addresses immediate concerns, lawmakers need to come up with a long-term housing finance solution next year.

On Thursday, the Department of the Treasury issued a statement indicating that it has agreed with the Federal Housing Finance Agency to modify the Preferred Stock Purchase Agreements with Fannie Mae and Freddie Mac

Previous modifications to the PSPAs required that the pair of secondary mortgage lenders pass through all their profits to the Treasury in the form of dividends — wiping out any capital buffer.

Source: Mortgage Daily