FHFA's 2013 Conservatorship Scorecard for the GSEs

Edward J. Demarco, the Acting Director of the Federal Housing Finance Agency (FHFA), has recently released the 2013 Conservatorship Scorecard for Fannie Mae and Freddie Mac.  This "Scorecard" is literally rating their performances on things like "the quality, thoroughness, creativity, effectiveness, and timeliness of their work products." They are also graded on how well they cooperate and collaborate with FHFA, each other, and the industry.

The three keywords that they must focus on are "Build, Contract, and Maintain." These were brought up in 2012 as the three goals of the FHFA's Strategic Plan for the GSEs.

"Build" refers to their goal to "build a new securitization infrastructure platform for the secondary mortgage market."

They must also "Contract the Enterprises dominant presence in the marketplace while simplifying and shrinking certain operations by lines of business."

And finally, they must "Maintain foreclosure prevention activities and credit availability for new and refinanced mortgages."

"Despite some signs of normalization in the housing market, our nation finds itself in the uncomfortable position of having over 90 percent of new mortgage originations supported by the federal government," said DeMarco. "That support is provided directly through government loan programs like the Federal Housing Administration (FHA), and through the financial support that the Treasury Department provides to maintain the solvency of Fannie Mae and Freddie Mac."

In the works is a new "joint company" headed up by the FHFA to focus on securitizing home loans. This is hoped to lead to decreased government involvement in the mortgage market. It would also mean that the FHFA is forcing Fannie Mae and Freddie Mac to abandon their current separate systems and construct a single infrastructure to support the mortgage market. This new entity will be the previously mentioned "joint company". It will be more structured and it will be owned by Fannie Mae and Freddie Mac.

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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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