Fannie and Freddie Asked to Write Their Wills
The final rule requires the GSEs to explain how core or essential business lines can be sustained to ensure continued support for mortgage finance
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and to stabilize the housing finance system without exceptional government support, to prevent a GSE from being put in receivership, litigate investors for losses, or fund the resolution of either company. Housing and Economic Recovery Act (HERA) The ultimate goal of the Housing and Economic Recovery Act was to restore public confidence in government-sponsored enterprises (GSEs) that offered home loans, namely Fannie Mae and Freddie Mac. It established the Federal Housing Finance Agency (FHFA) and authorized states to repay subprime loans with mortgage revenue bonds. As a new agency in 2008, the FHFA used its newly acquired authority to place Fannie Mae and Freddie Mac in conservatorship. Under the main act of HERA, there were several sub-title acts, including:
The Power Is Now Magazine | JUNE 2021
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he government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac have been directed to create so-called living wills. Such wills are comprehensive resolution plans that detail how either GSE could be resolved quickly or orderly if the Federal Housing Finance Agency (FHFA) is named receiver in case of another financial meltdown. The order is in the form of a final rule provided by the Federal Housing Finance Agency. The law is similar to those provided by the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve, requiring several large financial institutions to apply such wills. The Treasury Department and the Financial Stability Oversight Council have also approved living rules for the GSEs.
