What Is the Federal Housing Finance Agency (FHFA)?

The Federal Housing Finance Agency (FHFA) is an independent federal agency established under the Housing and Economic Recovery Act (HERA) of 2008. The FHFA's responsibilities include overseeing Fannie Mae and Freddie Mac, as well as the 11 Federal Home Loan (FHL) banks.

The FHFA was created to assist in strengthening the U.S. housing finance system in the wake of the financial collapse, due to the secondary mortgage market’s substantial role in the overall economy.

Key Takeaways

  • The Federal Housing Finance Agency (FHFA) is a U.S. regulatory agency that oversees the secondary mortgage market.
  • Created by the 2008 HERA Act, the FHFA serves to promote financial stability and provide sufficient credit to the mortgage market, following the 2008 housing crisis.
  • In its role, the FHFA also regulates Fannie Mae and Freddie Mac, the two largest government-sponsored mortgage enterprises.

Understanding the Federal Housing Finance Agency

The FHFA now handles the work that was previously done by the Office of Federal Housing Enterprise Oversight and the Federal Housing Finance Board. It is entirely separate from the Federal Housing Administration (FHA), which provides mortgage insurance.

The Federal Housing Finance Agency (FHFA) took over the legal and regulatory authority of the entities it replaced. It also has the ability to put government-sponsored entities into receivership or conservatorship. The FHFA has also acted as a conservator of Federal Home Loan Mortgage Corporation (FHLMC).

In its role, the FHFA has identified three goals:

  1. They seek to maintain credit availability and prevent foreclosure for all mortgages.
  2. The FHFA works to lower risks to taxpayer risk by elevating the part private capital plays within the mortgage market. 
  3. They strive to create a new securitization infrastructure for single-family homes through Fannie Mae and Freddie Mac, which can be modified in the future for use in the secondary market.

Federal Housing Finance Agency and Secondary Markets

The secondary mortgage market trades existing mortgages and mortgage-backed securities. The Federal Home Loan (FHL) banking system, which the FHFA oversees, offers more than $5.9 trillion to fund U.S. financial institutions and mortgage markets. FHL members include thrift institutions, credit unions, insurance companies, commercial banks, and other financial institutions.

In addition to mortgage funding, the FHL system also offers its members asset-liability management and liquidity for members' interim needs, as well as funding for projects involving community development. The FHL system is a critical part of the U.S. financial system; around 80 percent of U.S. lenders depend on them.

The Federal Housing Finance Agency (FHFA) is part of the Financial Stability Oversight Council (FSOC), which seeks to pinpoint and troubleshoot any risks to the United States' financial security. FHFA does not receive funding from Congress but instead receives funding from the entities it regulates.

Mortgage lending discrimination is illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development (HUD).