Banking

FHFA proposes living wills for Fannie and Freddie

WASHINGTON — The Federal Housing Finance Administration is seeking comment on a proposal to require the government-sponsored enterprises Fannie Mae and Freddie Mac to develop living wills.

The proposal, which was announced on Thursday, would require the GSEs to craft resolution plans similar to requirements imposed on the largest U.S. banks to map how they would be unwound in a failure.

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“Requiring the Enterprises to develop living wills, helps FHFA fulfill its responsibility to ensure that the failure of an Enterprise would harm neither taxpayers nor the mortgage market,” said FHFA Director Mark Calabria in a press release. “The proposed rule gives FHFA a tool that supplements its existing statutory authorities to restructure a failed Enterprise so that government does not have to put the Enterprises into conservatorship again.”

Under the proposed rule, Fannie and Freddie must demonstrate how important business lines would be maintained to ensure continued support for mortgage finance and to stabilize the housing finance system. The GSEs would have to show how they would keep those business lines operating without “extraordinary government support.”

The proposal follows a 2019 Treasury Department housing reform plan that highlighted the need for a credible resolution framework for the GSEs. The Financial Stability Oversight Council also endorsed living wills for the GSEs this year.

Interested parties may comment on the proposal within 60 days of its publication in the Federal Register.



 

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