FHFA Maps Out 2013 Plans for Future of Fannie, Freddie

By Barbra Murray, Contributing Editor

FHFA’s Edward DeMarco

Four-and-a-half years after the Federal Housing Finance Agency took over conservatorship of Fannie Mae and Freddie Mac, the roadmap for the revival of the troubled government-sponsored enterprises continues to evolve as FHFA releases the 2013 Conservatorship Scorecard for Fannie Mae and Freddie Mac.

“As part of the backdrop to issuing the Strategic Plan, there seems to be broad consensus that Fannie Mae and Freddie Mac will not return to their previous corporate forms,” FHFA acting director Edward J. DeMarco said during the presentation of the plan at the National Association for Business Economics 29th Annual Economic Policy Conference on March 4. “The Administration has made clear that their preferred course of action is to wind down the Enterprises.”

FHFA’s newly released guideline is an extension of 2012’s Strategic Plan for Enterprise Conservatorships. The goals are three-fold.

The most attention, 50 percent of the plan, will be given to pursuing the eventual reduction of Fannie and Freddie’s presence in the market to pave the way for private capital’s re-entrance into the market. Additionally certain operations of the GSEs will be streamlined. In the multi-family arena in particular, the unpaid principal balance amount of new business will be reduced by 10 percent from 2012 through the tightening of underwriting, adjustment of pricing and the curbing of product offerings.

Carrying a 30 percent weight of the proposal for realizing the new vision for Fannie and Freddie involves building a new infrastructure for the secondary mortgage market through a new common securitization platform and a model contractual framework. To that end, FHFA will form a independent business entity between the GSEs that will be led by both a CEO and a board chairman.

Finally, the remaining 20 percent of the plan’s focus will be on continuing foreclosure prevention activities and encouraging market stability and liquidity for new and refinanced mortgages. Efforts toward achieving this maintenance portion of the plan include the incentivizing of shorter-term refinance opportunities through reduced pricing.

FHFA is ready for the next big steps to be taken toward creating a new life for Fannie Mae and Freddie Mac.

“It is time that policy makers move on with formulating the role of the government in the mortgage market of the future,” DeMarco said. “The steps I have outlined today in regard to moving forward on the Strategic Plan in 2013 should help to set the stage for whatever transition policy makers set forth.

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