FHFA Prepared Remarks at MBA 100th Annual Convention
On October 28, the Federal Housing Finance Agency (FHFA) released the prepared remarks of Edward J. DeMarco, acting director, at the Mortgage Bankers Association’s 100th Annual Convention and Expo in Washington, DC.
An Update on the Conservatorships of Fannie Mae and Freddie Mac: Remarks at the MBA’s 100th Annual Convention and Expo
Thank you for inviting me to speak this morning. I would like to start by congratulating
the Mortgage Bankers Association on this 100th annual convention. That is quite a
history, one that traces from a much different and more limited, housing finance
system to one that creates far greater access to credit but that is recovering from a
nationwide trauma in housing.
The good news is that the recovery is taking hold. The opportunity for rebuilding our
housing finance system to a stronger, more competitive, and more resilient market is
before us. Yet challenges are all around us. Implementing an array of new mortgage
rules, many developed in response to the recent market and regulatory failures,
creates uncertainty as to cost and impact. And we have an opportunity to rebuild the
secondary mortgage market, but the political and policy challenges of that legislation
Over the past five years in which Fannie Mae and Freddie Mac, or the Enterprises as I
will refer to them, have been in conservatorships, much has been accomplished.
The Nation’s secondary mortgage market has continued to function. The Enterprises’
financial positions have stabilized. We have made significant progress resolving the
pre-conservatorship book of business. The Enterprises have played an important role
in providing foreclosure prevention and refinancing options to borrowers. And through
the Federal Housing Finance Agency (FHFA) Strategic Plan for Enterprise
Conservatorships (Strategic Plan), we have begun the process of building for a
future housing finance system.
However, even with those accomplishments, much remains to be done. The
single-family mortgage market remains heavily supported by taxpayers. While
there is progress on the legislative front, the timing of broader housing finance
reform remains uncertain.
Authority and Responsibilities of FHFA as Conservator
In 2008, the immediate objective or initial phase of the conservatorships was to stabilize
the Enterprises’ operations and ensure that the secondary mortgage market continued
As markets stabilized, the second phase of the conservatorships focused on
developing tools to assist troubled homeowners while reducing credit losses.
The next phase is determining our responsibility to direct the conservatorships going
forward. The law establishes the appointment of a conservator or receiver of the
Enterprises “for the purpose of reorganizing, rehabilitating, or winding up the affairs of
a regulated entity.”1 In fact, we are doing all three of these things – reorganizing,
rehabilitating, and winding up the affairs of Fannie Mae and Freddie Mac. This is
exactly the path we set forth last year when FHFA issued its Strategic Plan.
More specifically, FHFA set forth three broad goals in the Strategic Plan:
1. Build. Build a new infrastructure for the secondary mortgage market.
2. Contract. Gradually contract the Enterprises’ dominant presence in the marketplace while simplifying and shrinking their operations.
3. Maintain. Maintain foreclosure prevention activities and credit availability for new and refinanced mortgages.
We identified specific activities to achieve these goals in a Conservator’s Scorecard in 2012 and 2013 and much progress on those goals has been achieved.
But as time moves on, the scale of the Enterprises’ operations in conservatorship cannot remain static. As of December 31, 2012, the amount of taxpayer capital available to support the Enterprises’ outstanding debt and mortgage-backed securities (MBS) obligations is fixed. Limiting risk exposure is vital to maintaining the adequacy of the remaining capital support through the U.S. Department of the Treasury support agreements.
To view the remarks in their entirety, please click here.
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