The Federal Housing Finance Agency (FHFA) is an independent federal agency in the United States created as the successor regulatory agency of the Federal Housing Finance Board (FHFB), the Office of Federal Housing Enterprise Oversight (OFHEO), and the U.S.

Department of Housing and Urban Development The United States Department of Housing and Urban Development (HUD) is one of the executive departments of the U.S. federal government. It administers federal housing and urban development laws. It is headed by the Secretary of Housing and Ur ...

government-sponsored enterprise mission team, absorbing the powers and regulatory authority of both entities, with expanded legal and regulatory authority, including the ability to place government sponsored enterprises (GSEs) into

receivership In law, receivership is a situation in which an institution or enterprise is held by a receiver—a person "placed in the custodial responsibility for the property of others, including tangible and intangible assets and rights"—especially in c ...

conservatorship Under U.S. law, conservatorship is the appointment of a guardian or a protector by a judge to manage the financial affairs and/or daily life of another person due to old age or physical or mental limitations. A person under conservatorship is a ...

. In its role as regulator, it regulates

Fannie Mae The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a United States government-sponsored enterprise (GSE) and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression as part of the N ...

Freddie Mac The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is a publicly traded, government-sponsored enterprise (GSE), headquartered in Tysons Corner, Virginia.Federal Home Loan Banks The Federal Home Loan Banks (FHLBanks, or FHLBank System) are 11 U.S. government-sponsored banks that provide liquidity to the members of financial institutions to support housing finance and community investment. Overview The FHLBank System wa ...

(FHLBanks, or FHLBank System). It is wholly separate from the Federal Housing Administration, which largely provides

mortgage insurance Mortgage insurance (also known as mortgage guarantee and home-loan insurance) is an insurance policy which compensates lenders or investors in mortgage-backed securities for losses due to the default of a mortgage loan. Mortgage insurance can b ...

. In September 2019, the Fifth Circuit Court of Appeals, in an ''

en banc In law, an en banc session (; French for "in bench"; also known as ''in banc'', ''in banco'' or ''in bank'') is a session in which a case is heard before all the judges of a court (before the entire bench) rather than by one judge or a smaller p ...

'' opinion, ruled that the structure of the FHFA violated constitutional separation of powers because its director could not be removed by the president. The U.S. Supreme Court affirmed that part of the holding.

History

The 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 The United States Housing and Economic Recovery Act of 2008 () (commonly referred to as HERA) was designed primarily to address the subprime mortgage crisis. It authorized the Federal Housing Administration to guarantee up to $300 billion in ne ...

, 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 went out of existence. All existing regulations, orders and decisions of OFHEO and the Finance Board remain in effect until modified or superseded. On the day of the law's signing, former Director 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 The ''Federal Register'' (FR or sometimes Fed. Reg.) is the official journal of the federal government of the United States that contains government agency rules, proposed rules, and public notices. It is published every weekday, except on fede ...

on September 4, 2008. The notice formally announced the agency's existence and authority to act.

Conservatorships

On September 7, 2008, FHFA director Lockhart announced he had put

and

Freddie Mac The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is a publicly traded, government-sponsored enterprise (GSE), headquartered in Tysons Corner, Virginia. The action was "one of the most sweeping government interventions in private financial markets in decades". U.S. Treasury Secretary

Henry M. Paulson Henry Merritt Paulson Jr. (born March 28, 1946) is an American banker and financier who served as the 74th United States Secretary of the Treasury from 2006 to 2009. Prior to his role in the Department of the Treasury, Paulson was the Chairman a ...

, 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." In the announcement, 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 Herbert Monroe Allison, Jr. (August 2, 1943 – July 14, 2013) was an American businessman who oversaw the Troubled Asset Relief Program (TARP) as Assistant Secretary of the Treasury for Financial Stability from 2009 to 2010. His previous position ...

, for Fannie Mae and David M. Moffett for Freddie Mac. Allison is former Vice Chairman of

Merrill Lynch Merrill (officially Merrill Lynch, Pierce, Fenner & Smith Incorporated), previously branded Merrill Lynch, is an American investment management and wealth management division of Bank of America. Along with BofA Securities, the investment ba ...

and for the last eight years chairman of

TIAA-CREF The Teachers Insurance and Annuity Association of America-College Retirement Equities Fund (TIAA, formerly TIAA-CREF), is a Fortune 100 financial services organization that is the leading provider of financial services in the academic, research ...

. Moffett is the former Vice Chairman and CFO of

US Bancorp U.S. Bancorp (stylized as us bancorp) is an American bank holding company based in Minneapolis, Minnesota, and incorporated in Delaware. It is the parent company of U.S. Bank National Association, and is the fifth largest banking institution ...

. 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 of 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.

Suits against financial institutions

The FHFA in 2011 filed suit first against

UBS UBS Group AG is a multinational investment bank and financial services company founded and based in Switzerland. Co-headquartered in the cities of Zürich and Basel, it maintains a presence in all major financial centres as the largest Swi ...

then against 17 other financial institutions accusing them of misrepresenting about $200 billion in mortgage-backed securities sold to Fannie Mae and Freddie Mac. The suits, some of which name individual defendants, allege a variety of violations of federal securities law and common law and paint "a damning portrait of the excesses of the housing bubble." The suits seek a variety of damages and civil penalties.

FHFA settlements for fraudulent sales by PLS to Fannie Mae and Freddie Mac

The Federal Housing Finance Agency initiated litigation against 18 financial institutions involving allegations of securities law violations and, in some instances, fraud in the sale of private-label securities (PLS) to Fannie Mae and Freddie Mac. Below is a list of the cases, with amounts of any settlements reached in 2013 and 2014. Non-Litigation PLS Settlements Wells Fargo Bank, N.A. $335.23 million

Leadership

Upon Lockhart's departure,

Edward DeMarco Edward Joseph DeMarco is an American government official who served as the acting director of the Federal Housing Finance Agency (FHFA), the conservator for Fannie Mae and Freddie Mac, from 2009 through 2014. According to DeMarco, FHFA's mandat ...

was appointed Acting Director of FHFA on August 25, 2009. On May 1, 2013, President

Barack Obama Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party (United States), Democratic Party, Obama was the first Af ...

nominated Mel Watt as the next FHFA head. After Democrats eliminated rules allowing filibusters on executive branch nominations, the U.S. Senate confirmed Watt on December 10, 2013. On December 21, 2018, President

Donald Trump Donald John Trump (born June 14, 1946) is an American politician, media personality, and businessman who served as the 45th president of the United States from 2017 to 2021. Trump graduated from the Wharton School of the University of P ...

designated Comptroller of the currency

Joseph Otting Joseph M. Otting (born 1957) is an American businessman and government official. He served as the 31st Comptroller of the Currency from November 27, 2017Reuters (November 27, 2017).Joseph Otting, former banker, sworn in as top U.S. bank regulator ...

to be Acting Director of FHFA upon completion of Director Watt's term, effective January 7, 2019. In April 2019, Mark A. Calabria was confirmed to a five year term as director. At the time of his confirmation, the chair of the Senate Banking Committee said that Calabria had committed to working with the Senate toward ending the conservatorship over Fannie Mae and Freddie Mac. In the Supreme Court case '' Collins v. Yellen'', the Supreme Court ruled that, as they had in '' Seila Law LLC v. Consumer Financial Protection Bureau'' for the

Consumer Financial Protection Bureau The Consumer Financial Protection Bureau (CFPB) is an agency of the United States government responsible for consumer protection in the financial sector. CFPB's jurisdiction includes banks, credit unions, securities firms, payday lenders, mo ...

, that the inability for the President to terminate the FHFA director beyond "for cause" was unconstitutional, but otherwise left the agency's power as is. President Biden replaced Calabria with Sandra L. Thompson as Acting Director, who is expected to end Calabria's policy of phasing out the conservatorship.

Inspector General

Laura S. Wertheimer was nominated as

Inspector General An inspector general is an investigative official in a civil or military organization. The plural of the term is "inspectors general". Australia The Inspector-General of Intelligence and Security (Australia) (IGIS) is an independent statutory of ...

of the Federal Housing Finance Agency (FHFA) by President

, and confirmed by the U.S. Senate on September 17, 2015. On June 29, 2021 Wertheimer announced she would be leaving the position on July 30, 2021. This followed calls from Republican Senators

Chuck Grassley Charles Ernest Grassley (born September 17, 1933) is an American politician serving as the president pro tempore emeritus of the United States Senate, and the senior United States senator from Iowa, having held the seat since 1981. In 2022, h ...

and Ron Johnson for her removal in the preceding weeks, and a critical CIGIE report released on April 29, 2021.

References

External links

*
Federal Housing Finance Agency
in the

Office of Federal Housing Enterprise Oversight
in the Federal Register
2019 Performance and Accountability report
{{Authority control Federal Housing Finance Agency Government agencies established in 2008 United States Department of Housing and Urban Development Mortgage industry of the United States Independent agencies of the United States government Subprime mortgage crisis Housing finance agencies of the United States Financial regulatory authorities of the United States 2008 establishments in Washington, D.C.