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Behind the executive exodus at Fannie Mae

What's behind the wave of executive departures at Fannie Mae? It's not just money, according to former employees of the GSE.

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Politics & Money

FHFA to review exec compensation at Fannie & Freddie

For the first time in nearly a decade, the Federal Housing Finance Agency (FHFA) is taking a look at how its compensation measures up for executives at Fannie Mae and Freddie Mac.

On Thursday, the regulator issued a request for input to determine if the current compensation is not “reasonable” or “comparable.” In a statement, FHFA Director Mark Calabria said the information the FHFA gathers will help to ensure transparent and appropriate executive compensation policies.

“Compensation policies must balance the need for FHFA’s regulated entities to attract and retain talent while focusing on and fulfilling their core mission responsibilities,” said Calabria. “This review will be done in a way that emphasizes safety and soundness, protects taxpayers, and enhances financial stability in the housing system.”

Fannie Mae has told investors that the limits on compensation put it at a disadvantage when trying to attract and retain executives.

As detailed in this HousingWire feature, a string of high-level departures have rocked the housing finance giant in recent months. Many executives have taken positions at other firms where their compensation greatly exceeds what they earned at Fannie Mae.


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Freddie Mac has also taken its fair share of C-Suite hits – notably, its CEO David Brickman announced in November he was stepping down.

Sources at the GSEs have told HousingWire that morale is low at the companies, largely because of comparatively low compensation to the private sector but also restrictions and micromanagement from the FHFA.

In its questionnaire, the regulator asks respondents 25 questions to help it evaluate compensation. It asks them to consider compensation whether or not the government-sponsored entities remain in conservatorship.

The question subjects range from bonuses, to return objectives, diversity goals and what companies the GSEs should be compared to.

One question asks whether executives should be “prevented from earning bonuses after exiting conservatorship.” Another wonders if it is a problem that executive officers are not subject to return objectives while in conservatorship.

The request for input also asks how incentive compensation should be tied to diversity and inclusion objectives.

To help the regulator assess how the enterprises’ compensation stacks up to the market, it invited respondents to suggest which companies should be used as comparisons.

The last time FHFA examined the enterprises’ compensation was in 2012. That year, it sharply reduced executive pay, which had already been cut by 40%, and eliminated bonuses altogether. It also imposed a penalty on executives who left prior to scheduled payments.

While the entities are under conservatorship, it must adhere to limits on executive compensation determined by the FHFA. To set compensation, the FHFA compares duties and roles to those at a number of publicly-held and private financial institutions and other financial services companies. 

Finding any suitable comparison for the GSEs is difficult, however, given their unique role and federal oversight.

Unlike many of the firms they are compared to, executives do not receive any equity-based compensation. They don’t receive stocks or stock options. Bonuses are also out of the question.

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