Housing Banks May Be Forced To Cut Dividends

The Federal Housing Finance Board proposed rules this month that would require the banks to retain more of their earnings as capital to build up a bigger cushion against potential losses. The move comes in the wake of embarrassing stumbles by some of the 12 regional home-loan banks. The proposed rule probably will force most of the home-loan banks to slash their dividends, a big source of income for many of the more than 8100 commercial banks, thrifts, credit unions and insurers that own the banks. The proposal may also discourage the home-loan banks from purchasing mortgage loans made by their members, drying up a small but important source of housing finance and marginally increasing mortgage costs for consumers.

Source: WSJ