The CEOs of Fannie Mae and Freddie Mac are in line for a potential pay raise, as revealed in Freddie’s first quarter earnings on Tuesday. But the potential raises come with sharp industry opposition.

According to Freddie’s earnings statement, the board of directors received a communication from the director of the Federal Housing Finance Agency on the compensation of the CEO, as follows:

“Freddie Mac is authorized to submit a proposal for FHFA review and consideration on executive compensation for the position of Freddie Mac CEO to address the Board’s obligation and FHFA’s conservatorship and supervisory objectives of providing for CEO retention; effective succession planning for the CEO position; and continuity, efficiency and stability of operations during this extended period of conservatorship in which the future of the Enterprise is uncertain and the Enterprise is engaged in market transformative work.”

The potential raise does come with a set of guidelines outlined by the FHFA:

• It may not propose adjustment of CEO compensation before the third anniversary date of the current CEO (May 7, 2015)
• It may not propose compensation for the CEO that is higher than the 25th percentile of the market, using the agreed-upon comparator group for FHFA evaluation of compensation of Freddie Mac's executive officers.
• A proposal must comply with applicable law, including 12 USC 4518(a) and 4518a, and must be consistent with Freddie Mac's charter act, 12 USC 1452(c). In particular, compensation must be reasonable and comparable with similar positions at similar companies and must take into consideration Freddie Mac's status in conservatorship and FHFA's statutory power as conservator to preserve and conserve assets, 12 USC 4617(b).
• Recommendations must include pay for performance aspects and may not include a ‘bonus’.

Fannie Mae and Freddie Mac paid top executives a combined $35 million in 2009 and 2010, while the CEOs at Fannie and Freddie earned a combined salary of $17 million with options to take home $24 million.

FHFA Director Mel Watt said in a statement that the current CEO compensation framework limits the ability of the boards of directors at Fannie Mae and Freddie Mac to promote retention of their CEOs, to develop reliable CEO succession plans and to ensure continuity of operations and organizational stability. 

“All regulators require the boards of their regulated entities to have viable succession plans. While the enterprises remain in conservatorships, continuity and stability are integral to the ability of FHFA to fulfill its statutory responsibility to ensure Fannie Mae and Freddie Mac operate safely and soundly and foster liquidity in the national housing finance markets,” Watt said.

However, the industry, and even the government, does not share the same opinion.

"Treasury has consistently communicated to FHFA that a change in CEO compensation at Fannie Mae and Freddie Mac is not appropriate, given that taxpayers continue to backstop both enterprises. Ultimately, FHFA, not Treasury, has sole authority over executive compensation at Fannie Mae and Freddie Mac. Nonetheless, Treasury strongly recommends that FHFA continue its existing limits on CEO compensation," Adam Hodge, a spokesperson for the U.S. Treasury, said.

Michael Stegman, counselor to the secretary for housing finance policy with the Treasury, recently spoke at the GoldmanSachs (GS) Housing Finance Conference in New York Ciy, saying that the current status quo is unsustainable and taxpayers are still on the hook.

“The critical flaws in the legacy system that allowed private shareholders and senior employees of the GSEs to reap substantial profits while leaving taxpayers to shoulder enormous losses cannot be fixed by a regulator or conservator because they are intrinsic to the GSEs’ congressional charters,” Stegman said.

U.S. Senator Mark Warner, D-Va, shared opposition to the issue and said in a statement, “Our current mortgage finance system – with only private gains and public losses – is unsustainable, and last week’s stress tests results confirmed that Fannie and Freddie remain in an unsustainable position. The GSEs have been in conservatorship since 2008, after requiring a $188 billion taxpayer bailout. Yet now we learn that their regulator may allow a steep increase in executive compensation. It is long past time for Congress to fix this flawed business model and enact responsible reforms to our housing finance system.”

Tweets from Jody Shenn, mortgage reporter from Bloomberg, and Jon Prior, housing reporter for Politico, also show similar negative industry opinions.  

Rep. Royce plans on introducing legislation soon that would halt a pay hike for Fannie, Freddie CEOs, would mirror 2011 bill, more soon…

— Jon Prior (@JonAPrior) May 5, 2015

So… looks like some of the DC political crowd is NOT happy with the talk of Fannie/Freddie CEO pay hikes.

— Jody Shenn (@JodyShenn) May 5, 2015