The Federal Housing Finance Agency is launching an initiative that will determine whether an individual or company should be suspended from doing business with Fannie Mae, Freddie Mac or the Federal Home Loan Banks as a threat to their safe and sound operations.
The agency said in a statement that it is “taking this additional step to ensure the regulated entities are not exposed to unnecessary risk from doing business with individuals or businesses with a demonstrated history of fraudulent conduct.”
Titled the Suspended Counterparty Program, the initiative requires Fannie, Freddie and the FHLBanks to notify FHFA when an individual or company with whom they do business is legally found to have engaged in fraud or other financial misconduct. The regulator will also consider information from other government sources.
FHFA would not provide more detail on the initiative, but said in the statement that affected parties will have an opportunity to show cause why they should not be suspended. The agency will issue orders directing the regulated entities to stop doing business with the individual or company based on a history of fraud.
This program goes live August 15.