Government Sponsored Enterprises (GSEs)

Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (FHLBs) are government-sponsored enterprises (GSEs) that help bring capital to the housing markets. Their regulator is the Federal Housing Finance Agency (FHFA).

HFAs and the Housing GSEs
The GSEs are critical in providing liquidity, stability and affordability to the mortgage market, particularly for long-term, fixed-rate mortgages. Fannie Mae and Freddie Mac purchase and securitize loans from HFAs and other lenders who then use the proceeds to finance more mortgages. The FHLBs provide advances and other financial products to support their members’ affordable housing activities.

Both Fannie Mae and Freddie Mac have done business with the HFAs to help support affordable single-family and multifamily housing opportunities. Both firms currently offer specific HFA-only products that allow HFAs to sell the single-family loans with preferred terms. Recognizing HFAs’ track record of responsibly supporting affordable housing lending, FHFA has directed Fannie Mae and Freddie Mac to work more closely with HFAs.

In addition, until recent years, Fannie Mae and Freddie Mac were large purchasers of Housing Bonds and Housing Credits. Both firms plan to resume their Housing Credit investments soon.

Some HFAs have also partnered with the various FHLBs to finance their single-family and multifamily programs. HFAs are allowed to join their local FHLB ranch as associate housing members.

GSE Reform

NCSHA supports a strong, healthy GSE system in order to ensure stability, liquidity, and affordability in the home mortgage market. NCSHA’s position paper on GSE reform calls for a system with an explicit government guarantee, robust affordable housing goals, and a clear commitment to partnering with HFAs.

In September 2019, the Trump Administration released a comprehensive plan for reforming the GSEs Fannie Mae and Freddie Mac. The plan focuses on removing the government-sponsored enterprises Fannie Mae and Freddie Mac from conservatorship and establishing a new competitive secondary housing finance market.  It would also eliminate Fannie Mae and Freddie Mac’s current affordable housing obligations and.  In their place, Fannie Mae, Freddie Mac, and other mortgage guarantors would pay fee on all mortgage securities receiving federal backing. Proceeds from the fees would be used to support various affordable housing programs.

While many of the Administration’s 49 proposals require Congress to pass legislation, there are some that FHFA cam carry out administratively.  FHFA Director Mark Calabria has stated removing Fannie Mae and Freddie Mac from federal conservatorship is his top priority a director, and has directed the GSEs to take what actions are necessary to carry out the president’s housing finance reform plan.

Moving forward, NCSHA will continue to work with Congress, FHFA, and other executive branch agencies to advocate for a future housing finance system that supports the housing needs of all Americans and encourages GSE-HFA partnerships.