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This new center is the complete GSE resource for the real estate finance industry. This online center will house a current and comprehensive collection of resources on activity and changes relating to Fannie Mae and Freddie Mac.
New Resource:
Frequently Asked Questions: Treasury Senior Preferred Stock Purchase Agreement (prepared by Treasury)
Letter from MBA with Links to Resources:
The following is a letter issued to the industry from John A. Courson, Chief Operating Officer of the Mortgage Bankers Association (MBA).
Sunday, September 7, 2008
Today, the U.S. government took a historic step to stabilize the U.S. mortgage markets and financial system by placing Fannie Mae and Freddie Mac in conservatorship.
During a mid-morning press conference by government officials, they announced these key steps:
- Conservatorship: Fannie Mae and Freddie Mac are placed into conservatorship immediately. (No change in status for the Federal Home Loan Banks.)
- GSE Portfolios: To promote market stability, the GSEs will be allowed to increase their MBS portfolios through the end of 2009. However, starting in 2010 the portfolios will gradually be reduced at a rate of 10% per year through run-off, eventually stabilizing at a much lower size.
- Treasury Preferred Stock Agreement: Treasury and the Federal Housing Finance Agency (FHFA) have established Preferred Stock Purchase Agreements to ensure that each company maintains positive net worth. These agreements are intended to provide security to GSE debt holders and MBS investors. In exchange, Treasury receives a senior preferred equity share and warrants to protect taxpayers - common and preferred shareholders will bear any potential losses ahead of the government's senior preferred shares.
- Secured Lending Credit Facility: Treasury has established a new secured lending credit facility which will be available to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. This facility is intended to serve as an "ultimate liquidity backstop." This facility will expire on December 31, 2009.
- Treasury Program to Buy GSE MBS: Later this month, Treasury will be initiating a temporary program to purchase Fannie Mae and Freddie Mac MBS. Such purchases will be made as appropriate. The program will expire on December 31, 2009.
Other highlights:
- On Monday, the GSEs are expected to resume normal business operations.
- The U.S. government assumes control over the Board and management.
- Current Fannie Mae and Freddie Mac CEOs are being replaced, but will stay on through a transition period.
- Herb Allison will assume CEO duties at Fannie Mae, and David Moffett will assume CEO duties at Freddie Mac.
- There will be limited initial management actions - they will work with the current management team.
- Dividends on preferred and common stock will be suspended.
- All lobbying/political activity by the GSEs will cease.
Key Documents:
Next Steps:
MBA has been actively monitoring this situation throughout the weekend, working closely with the Administration, Congress, and the media. Today’s actions have significant implications for the future of the U. S. housing finance system. Clearly, there will be robust policy debates over the long-term structure and role of the GSEs. In anticipation of these discussions, MBA will be working with its members to develop policy options that ensure a strong secondary mortgage that provides a stable supply of affordable mortgage credit.
Yours Very Truly,
John A. Courson
Chief Operating Officer
Mortgage Bankers Association
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