Washington, D.C. – Federal Housing Finance Agency Director James B. Lockhart outlined FHFA’s accomplishments and the challenges ahead for the nation’s housing finance system during a program at the National Press Club. The event coincided with the first anniversary of the Housing and Economic Recovery Act of 2008 (HERA), signed into law one year ago on July 30, 2008.
"Our activities as an agency in the past year have more significance, require more coordination, and are watched more by outside parties than ever before," said Lockhart. "The last 12 months have been action-packed and have set us on the right path. We have accomplished a lot, but we have much more to do," said Lockhart.
Lockhart highlighted key accomplishments, which include administrative and supervisory milestones.
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FHFA has combined the personnel and financial systems of two separate organizations established an infrastructure for FHFA.
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FHFA is working effectively with the Enterprises as their conservator, even as we continue to oversee them as their regulator. The new boards of directors worked recently to refill CEO positions at both Fannie Mae and Freddie Mac.
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FHFA has been working with the 12 FHLBanks to develop a common accounting platform for their private-label MBS.
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FHFA staff were instrumental in working with the Treasury Department and the rest of the Obama Administration, the Enterprises, other regulators and the private sector to develop and implement the Homeowner Affordability and Stability Program, to address the problems of foreclosure prevention and people with "underwater" mortgages.
Also today, FHFA senior managers presented three reports that HERA requires the agency to produce in the first year, including a study of Enterprise guarantee fees and one on FHLBank securitization. The Agency also published seven new regulations relating to the housing mission of the GSEs, including the final 2009 affordable housing goals and A Notice of Proposed Rulemaking on the "duty to serve" manufactured housing and other obligations set forth in HERA.
In addition to the studies and regulations, Director Lockhart reviewed the Agency’s four-pronged strategy to help stabilize the mortgage market. He outlined numerous challenges ahead for FHFA, Fannie Mae, Freddie Mac and the 12 FHLBanks.
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For the FHLBanks, managing capital prudently given some FHLBanks’ exposure to private-label MBS, finding the best way of providing System support for individual FHLBanks, and ensuring more consistency in financial disclosures and accounting are among the biggest challenges.
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For Fannie Mae and Freddie Mac, stabilizing the housing market through the Making Home Affordable Modification and Refinancing Programs is one of the biggest challenges they face. This will reduce the credit risk on their $5.4 trillion mortgage exposure. Fannie Mae also has an important role as administrator of the program and Freddie Mac an equally critical role in program compliance.
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Other challenges include supporting housing affordability and the multifamily market and emerging from conservatorship.
Looking to the future, Lockhart emphasized the need to shift the regulatory framework for the GSEs toward countercyclical policies, particularly capital policies, that will help curb asset price bubbles and improve the odds that an institution can survive a crisis.
"We need new policies that strengthen the ability of financial institutions to withstand distress by encouraging or requiring them to build up capital reserves in good times instead of having to rebuild capital in bad times," said Lockhart.
Lockhart also discussed three possible future structures for the Enterprises when they emerge from conservatorship: government agency, improved GSE, or fully private firms.
"It is crucial that we get the restructuring done right for the U.S. and world economies and all present and future homeowners and renters," said Lockhart. "The new structures must be designed to reduce risks rather than magnifying them, as they did in the past," Lockhart said.
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The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $6.3 trillion in funding for the U.S. mortgage markets and financial institutions.
Contacts: Corinne Russell (202) 649-3032 / Stefanie Johnson (202) 649-3030