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Federal Housing Finance Agency (FHFA) suspends evaluation of Fannie Mae/Freddie Mac assets

... of Fannie and Freddie, it will not require Fannie and Freddie to meet FHFA-directed regulatory capital requirements. What this will mean: you won’t know for years and years what the U.S. Treasury really are. On July 30, 2008, President Bush signed the Housing and Economic Recovery Act to establish the Federal Housing Finance Agency (FHFA) and transfer oversight responsibilities for Fannie Mae and Freddie Mac (the Enterprises) from the Office of Federal Housing Enterprise Oversight (OFHEO), which many say was asleep at the switch during the 2008 mortgage meltdown. Accountability fans: don’t forget it was the 1992 {Clinton} Congress that authorized Fannie and Freddie “to provide stability in the secondary market for residential mortgages, respond appropriately to the private capital market, provide ongoing assistance to the secondary market for residential mortgages, and promote access to mortgage credit throughout the country.”
Semantics fans: The title of this law is the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 and pretended to ensure that Fannie and Freddie portfolio holdings were backed by sufficient capital.
Under the law, FHFA must evaluate the ability of Fannie Mae and Freddie Mac to provide a liquid secondary market through securitization activities; evaluate Fannie and Freddie portfolio holdings in relation to the overall mortgage market; and ensure that Fannie and Freddie holdings are consistent with the mission of financing affordable housing for low- and moderate-income families (sub-prime risk).
According to the announcement, FHFA's goals in placing Fannie and Freddie into conservatorship included injecting liquidity into the mortgage markets and limiting the risk that Fannie and Freddie failures would destabilize both the mortgage markets and the American financial system.
The notice is silent on the question of whether FHFA will change the Fannie and Freddie “mission to finance low- and moderate-income housing.” It does authorize an increase in mortgage assets to $850 billion for Fannie and Freddie each.
FHFA says the rules “should ensure that [Fannie and Freddie] portfolio holdings are backed by sufficient capital.”
FHFA says it will amend rules as appropriate after considering public comments due in writing on or before June 1, 2009 (they’d like it hand-delivered, by e-mail or in writing with CD-ROM duplicate)
For More Information Contact: Ming-Yuen Meyer-Fong, Office of the General Counsel, (202) 414-3798, or Valerie Smith, Office of Policy Analysis and Research, (202) 414-3770, Federal Housing Finance Agency.
FHFA wants your comments by e-mail, post, or hand-delivered in hard copy, which must also be accompanied by the electronic version in Microsoft Word or in a portable document format (PDF) on 3.5'' disk or CD-ROM.
FR: January 30, 2009

How Broke is Broke?

The Federal Housing Finance Agency (FHFA) adopts interim final rule to define critical capital for the twelve Federal Home Loan Banks ...  establish the guidelines for the capital classifications identified in The Housing and Economic Recovery Act of 2008 (HERA) ... and define its authority over the Banks.

The classifications outlined in the law are: adequately capitalized ... undercapitalized ... significantly undercapitalized ... and critically undercapitalized.

The law creating the Federal Home Loan Banks requires them to establish affordable housing programs and contribute a specified portion of its previous year's net income to support that program. The purpose of the program is to enable Bank members to finance homeownership for low- or moderate-income households and the purchase, construction or rehabilitation of rental projects that benefit very low-income households.

The Federal Housing Finance Agency was created by 2008 (HERA) to replace The Office of Federal Housing Enterprise Oversight (OFHEO) and the Federal Housing Finance Board (FHFB). 

For complete details, visit the archives at Federal Housing Finance Agency, Critical Capitalization Levels for Federal Home Loan Banks, 12 CFR Part 1229, Final Rule, January 30, 2009.

The Cosmetics of Pork

The Federal Housing Finance Agency has announced that it adopted rules, effective January 29, 2009 to limit golden parachute payments to Fannie Mae, Freddie Mac and Federal Home Loan Bank executives.

The Federal Housing Finance Agency was created by The Housing and Economic Recovery Act of 2008 (HERA) to replace The Office of Federal Housing Enterprise Oversight (OFHEO) and the Federal Housing Finance Board (FHFB).

However, the Federal Housing Finance Agency has only deferred any real action, leaving golden parachute without effective limitation. Speaking in the arcane language of Federal rulemaking, "the FHFA has determined that it will consider adding provisions similar to those of the FDIC golden parachute regulation in a subsequent rulemaking."

According to Greek mythology scholar Robert Graves, Hera was known both as "the Protectress" and "Goat-eating Hera." Which of these HERA will become has yet to be seen.

For complete details, visit the archives at Federal Housing Finance Agency, Golden Parachute Payments, 12 CFR Part 1231,Final Rule, January 29, 2009.

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