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. It was created to help strengthen 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 in the wake of the 2008 housing crisis.
  • 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 FHFA took over the legal and regulatory authority of the entities it replaced. It has the ability to put government-sponsored entities into receivership or conservatorship. It has also acted as a conservator of the Federal Home Loan Mortgage Corporation (FHLMC), known colloquially as “Freddie Mac.”

In its role, the FHFA has identified three goals:

  1. It seeks to maintain credit availability and prevent foreclosure for all mortgages.
  2. It works to lower risk to taxpayers by elevating the part private capital plays within the mortgage market. 
  3. It strives 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.

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, either with the Consumer Financial Protection Bureau (CFPB) or the U.S. Department of Housing and Urban Development (HUD).

Federal Housing Finance Agency and Secondary Markets

The secondary mortgage market trades existing mortgages and mortgage-backed securities. Together with Fannie Mae and Freddie Mac, the Federal Home Loan (FHL) banking system offers more than $6.6 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% of U.S. lenders depend on its members.

The 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 gets it from the entities it regulates.