FHFA's Next Step Regarding GSE Conservatorship

In February 2010, the FHFA's Acting Director Edward J. DeMarco wrote a letter to Congress regarding conservatorships of the GSEs Fannie Mae and Freddie Mac. Recently, he has also released the next phase of his plan that builds on what he wrote in that letter 2 years ago. It is meant to update and extend the goals of these conservatorships.

First of all, what is a conservatorship? The FHFA is the conservator, or an organization that has legal control over another entity, which would in this case be the GSEs. Fannie Mae and Freddie Mac have received $180 billion in taxpayer support since they have been placed into conservatorship in September 2008.

DeMarco's plan will establish objectives that the FHFA is to take in order to meet its obligations as a conservator. It consists of three strategic goals. First of all, the FHFA will build a brand new infrastructure for the secondary mortgage market that will be consistent with existing policy. Second, they hope to contract the GSEs' dominant presence in the marketplace by simplifying and shrinking their operations. And lastly, they will work to maintain foreclosure prevention activities and credit availability for mortgages, both new and refinanced. The end goal is to come to a resolution for the conservatorships and to review the housing finance system.

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