Federal Housing Finance Agency (FHFA)

What is 'Federal Housing Finance Agency (FHFA)'

The Federal Housing Finance Agency (FHFA) is an independent federal agency established by the Housing and Economic Recovery Act (HERA) of 2008. It is responsible for the supervision, regulation, and oversight of Fannie Mae, Freddie Mac, and the 11 Federal Home Loan (FHL) banks. The FHFA was created to 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.

BREAKING DOWN 'Federal Housing Finance Agency (FHFA)'

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) absorbed the legal and regulatory authority of the entities it replaced, including the power to place government-sponsored entities into receivership or conservatorship. Since 2008, FHFA has served as conservator of Federal Home Loan Mortgage Corporation (FHLMC), also known as Freddie Mac, and Fannie Mae.

In this role, the FHFA has identified three goals. 

  1. They seek to maintain credit availability and foreclosure prevention activities for new and refinanced mortgages to foster liquid, competitive, and resilient national housing finance markets. 
  2. The FHFA works to decrease taxpayer risk by increasing the role of private capital in the mortgage market. 
  3. They seek to construct a new single-family securitization infrastructure that is adaptable for use by future participants 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, provides more than $5.9 trillion in funding for the U.S. mortgage markets and financial institutions. FHL members include thrift institutions, commercial banks, credit unions, insurance companies, and certified community development financial institutions.

The FHL system offers its members a source of funding for mortgages and asset-liability management, liquidity for their short-term needs, and additional funds for housing finance and community development. Approximately 80-percent of U.S. lending institutions rely on the FHL banks, making it a critical part of the U.S. financial system.

The Federal Housing Finance Agency (FHFA) is a member of the Financial Stability Oversight Council, which oversees identifying risks to the financial stability of the United States, promoting market discipline and responding to emerging risks to the security of the United States' economic system. FHFA does not receive funding from Congress but instead receives funding from the entities it regulates.