The Federal Housing Finance Agency (FHFA) has published a final rule requiring Fannie Mae and Freddie Mac, also known as the Enterprises, to develop resolution plans or living wills.
The action would result in a rapid and orderly resolution of the Enterprises in the event FHFA be appointed their receiver under the Housing and Economic Recovery Act of 2008 (HERA).
“After the capital rule, the finalization of the living will rule is one of the last major regulatory pieces needed to give effect to Congress’ intent in HERA,”
Director Mark Calabria said. “Just like other large financial institutions, these plans will provide Fannie Mae, Freddie Mac, and FHFA with a roadmap for preserving business continuity should they fail again.”
Calabria said the rule aids in creating a more resilient housing finance system by protecting taxpayers and the mortgage market from harm if either Enterprise fails.
The guidance stipulates that Enterprises must demonstrate how core business lines would be maintained to ensure support for mortgage finance and stabilize the housing finance system, prevent an Enterprise from being placed in receivership, indemnify investors against losses, or fund the resolution of an Enterprise.
Authorities maintain the final rule is similar to rules issued by the Federal Reserve Board and the Federal Deposit Insurance Corporation under the Dodd-Frank Wall Street Reform and Consumer Protection Act.