The Federal Housing Finance Agency (FHFA) and the US Department of the Treasury announced amendments to the Preferred Stock Purchase Agreements (PSPAs) related to the government-sponsored enterprises (GSEs) Fannie Mae (OTCBQ: FNMA) and Freddie Mac (OTCQB: FMCC).
At the time the original PSPAs were executed when the GSEs were placed into federal conservatorship in September 2008, written Treasury consent was required before the conservatorships could be terminated. The new amendments will restore the consent right that was suspended in September 2021. FHFA and Treasury also announced “a process for eventual public input on termination options and potential impacts” on ending the conservatorship.
“The Enterprises play a vital role in the national housing finance system,” said FHFA Director Sandra L. Thompson. “Today’s announcement will reassure stakeholders that the Enterprises’ eventual release from conservatorship will follow a methodical process intended to minimize disruption to the housing and financial markets.”
Since taking office in January 2021, the Biden administration did not offer any plans for ending the conservatorship. Economic advisors to President-elect Trump have reportedly been creating a strategy to end the conservatorship and privatize the GSEs.
Mortgage Bankers Association President and CEO Bob Broeksmit issued a statement warning that any efforts to take the GSEs out of conservatorship “must fully consider the impact on single-family and multifamily housing markets and overall financial stability. This includes the critical move that Congress establishes an explicit federal backstop for mortgage-backed securities. Conservatorship was never intended to be perpetual, and we support efforts toward the GSEs’ release. We appreciate the rationale behind today’s changes to the PSPAs, which are designed to foster transparency across government agencies, share market impact analysis, and give appropriate time for market participants to provide feedback on proposed reforms.”
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