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Politics & Money

FHFA announces proposed rule on living wills for GSEs

Agency wants GSEs to develop a plan to safely unwind from conservatorship

The Federal Housing Finance Agency (FHFA) took another step in its quest to remove Fannie Mae and Freddie Mac from conservatorship on Tuesday, seeking public comment on a rule that would require Fannie Mae and Freddie Mac to develop plans to unwind without negatively affecting the broader financial system.

Should the FHFA be appointed receiver for the government-sponsored entities, the so-called “living wills” would facilitate a rapid and orderly resolution from conservatorship, the agency said Tuesday.

“The rule proposed today is an important step toward a stronger housing finance system,” said Mark Calabria, FHFA director. “Requiring [Fannie Mae and Freddie Mac] to develop living wills helps FHFA fulfill its responsibility to ensure that the failure of either would harm neither taxpayers nor the mortgage market.”

The proposed rule gives the FHFA a tool that supplements its existing statutory authorities, Calabria said, to restructure either Fannie Mae or Freddie Mac if either fail so that the government does not have to put them back into conservatorship.

The rule is similar to the one issued by the Federal Reserve Board and the Federal Deposit Insurance Corporation under the Dodd–Frank Wall Street Reform and Consumer Protection Act, which requires many large financial institutions to submit living wills.


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The Treasury Department’s 2019 Housing Reform Plan highlighted the need for a credible resolution framework for Fannie Mae and Freddie Mac, and the Financial Stability Oversight Council endorsed living wills in the early fall of 2020, the agency said.

Under the proposed rule, Fannie Mae and Freddie Mac must demonstrate how core or important business lines would be maintained to ensure continued support for mortgage finance and stabilize the housing finance system.

Under Calabria, the FHFA has aggressively sought to remove the two companies from conservatorship. But in the waning days of the Trump administration, it appears unlikely he’ll be able to achieve that goal.

A number of prominent business groups and officials have come out against a “hasty” exit from conservatorship, and members of the Biden administration haven’t expressed interest in early exit for Fannie and Freddie.

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