June 16, 2014

FHFA annual report details GSEs' risks, successes

June 17, 2014 – The Federal Housing Finance Agency notes the challenges of Fannie Mae and Freddie Mac remaining in conservatorship in its 2013 annual report to Congress, which included the agency's examinations of Fannie Mae and Freddie Mac from 2013.

The report notes the combined $132.7 billion in net income between the two enterprises. It also detailed 2013 findings from the Federal Home Loan Bank system and FHLBs' joint Office of Finance. The report to Congress evaluated:

  • the safety and soundness of the regulated entities;
  • any material deficiencies in the conduct of the operations of the regulated entities;
  • the overall operational status of the regulated entities; and
  • an evaluation of the performance of the regulated entities in carrying out their respective missions.

The report said all 12 FHLBs exceeded the minimum 4 percent leverage ratio as of Dec. 31, 2013.

Regarding Fannie and Freddie, it said the two government-sponsored enterprises "cannot remain in conservatorship permanently" and that it is critical to maintain "safe and sound operations in the face of uncertainty regarding the long-term prospects of the enterprises' operations and charters." It also said the entities remain exposed to credit, counterparty and operational risk despite being financially supported by Treasury.

However, the report acknowledged, "Both Enterprises also continue to serve an important role in efforts to limit preventable foreclosures, both to mitigate Enterprise losses as well as to enhance stability in housing markets and local communities."

How long the entities remain in conservatorship rests largely on how Congress decides the issue of housing finance reform. The Senate Banking Committee last month reported out S. 1217, the "Housing Finance Reform and Taxpayer Protection Act," but its future in the Senate is unclear. Meanwhile, House Financial Services Committee Chairman Jeb Hensarling, R-Texas, has said time is running out for action this year.