Federal Housing Finance Agency

The Federal Housing Finance Agency is an independent federal agency created as the successor regulatory agency resulting from the statutory merger of the Federal Housing Finance Board (FHFB) and the Office of Federal Housing Enterprise Oversight (OFHEO), absorbing the powers and regulatory authority of both entities, with expanded legal and regulatory authority, including the ability to place government sponsored enterprises into receivership or conservatorship. [] [ ] ]

The enabling law establishing the FHFA is the Federal Housing Finance Regulatory Reform Act of 2008, which is Division A of the larger Housing and Economic Recovery Act of 2008, Public Law 110-289, signed on July 30, 2008 by President George W. Bush. One year after the law was signed, the OFHEO and the FHFB shall go out of existence. All existing regulations, orders and decisions of OFHEO and the Finance Board remain in effect until modified or superseded. James B. Lockhart III, the director of OFHEO, is the director of the new FHFA.] ] [See HR 3221, signed into law as Public Law 110-289: "A bill to provide needed housing reform and for other purposes."
Access to Legislative History: Library of Congress THOMAS: [http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.03221: A bill to provide needed housing reform and for other purposes.]
White House pre-signing statement: [http://www.whitehouse.gov/omb/legislative/sap/110-2/saphr3221-h.pdf Statement of Administration Policy: H.R. 3221 – Housing and Economic Recovery Act of 2008] (July 23, 2008). Executive office of the President, Office of Management and Budget, Washington DC.]

On the day of the law's signing, James Lockhart stated: "For more than two years as Director of OFHEO I have worked to help create FHFA so that this new GSE regulator has far greater authorities than its predecessors. As Director of FHFA, I commit that we will use these authorities to ensure that the housing GSEs provide stability and liquidity to the mortgage market, support affordable housing and operate safely and soundly." ]

FHFA director Lockhart transmitted a "notice of establishment," for publication in the Federal Register on September 4, 2008. The notice formally announced the agency's existence and authority to act. [ [http://www.ofheo.gov/media/news%20releases/FHFARegisterNotice9408.pdf FHFA “Notice of establishment sent to the Fdderal Register] . (Press Release) (September 4. 2008) Federal Housing Finance Agency. (Summarizing the Federal Register transmittal.) ] [ [http://www.ofheo.gov/media/news%20releases/FHFARegisterNotice9408.pdf Establishment of a new independent agency] Federal Housing Finance Agency. (August 30, 2008). (Signed by James B. Lockhart III, Director, FHFA) -- The notice as transmitted to the Federal Register.]

Conservatorship of Fannie Mae and Freddie Mac

On September 7, 2008, FHFA director Lockhart announced he had put Fannie Mae and Freddie Mac under the conservatorship of the FHFA. [ ] cite news |title=Fact Sheet: Questions and Answers on Conservatorship |date=2008-09-07 |publisher=Federal Housing Finance Agency |url=http://www.ofheo.gov/media/PDF/FHFACONSERVQA.pdf |accessdate=2008-09-07] The action is "one of the most sweeping government interventions in private financial markets in decades". ] U.S. Treasury Secretary Henry M. Paulson , appearing at the same press conference, stated that placing the two GSEs into conservatorship was a decision he fully supported, and said that he advised "that conservatorship was the only form in which I would commit taxpayer money to the GSEs." He further said that "I attribute the need for today's action primarily to the inherent conflict and flawed business model embedded in the GSE structure, and to the ongoing housing correction.". cite news | first= Henry M., Jr. | last= Paulson | coauthors= (Press release statement) | title= Statement by Secretary Henry M. Paulson, Jr. on Treasury and Federal Housing Finance Agency Action to Protect Financial Markets and Taxpayers | date= 2008-09-07 | publisher= United States Department of the Treasury | url = http://www.treas.gov/press/releases/hp1129.htm | work = | pages = | accessdate = 2008-09-07 | ]

In the announcement, Mr. Lockhart indicated the following items in the plan of action for the conservatorship:
# On September 8, 2008, the first day of the conservatorship, business will be conducted normally, with stronger backing for the holders of Mortgage Backed Securities (MBS), senior debt and subordinated debt.
# The Enterprises will be allowed to grow their guarantee MBS books without limits and continue to purchase replacement securities for their portfolios, about $20 billion per month, without capital constraints.
# As the conservator, the FHFA will assume the power of the Board and management.
# The present CEOs have been dismissed, but will stay on to help with the transition.
# Appointed as CEOs are Herb Allison, for Fannie Mae and David M. Moffett for Freddie Mac. Allison is former Vice Chairman of Merrill Lynch and for the last eight years chairman of TIAA-CREF. Moffett is the former Vice Chairman and CFO of US Bancorp. Their compensation will be significantly lower than the outgoing CEOs. They will be joined by equally strong non-executive chairmen.
# Other management action will be very limited. The new CEOs agreed it is important to work with the current management teams and employees to encourage them to stay and to continue to make important improvements to the Enterprises.
# To conserve over $2 billion annually in capital the common stock and preferred stock dividends will be eliminated, but the common and all preferred stocks will continue to remain outstanding. Subordinated debt interest and principal payments will continue to be made.
# All political activities, including all lobbying, will be halted immediately. Charitable activities will be reviewed.
# There will be financing and investing relationship with the U.S. Treasury via three different financing facilities, to provide critically needed support to Freddie Mac and Fannie Mae and the liquidity of the mortgage market. One the three facilities is a secured liquidity facility which will be not only for Fannie Mae and Freddie Mac, and also for the 12 Federal Home Loan Banks that FHFA also regulates.

References

External links

Official web site of [http://www.ofheo.gov Federal Housing Finance Agency (FHFA)]