Rule Would Require Living Wills For Fannie, Freddie

The Federal Housing Finance Agency announced a new proposed rule Tuesday that would require Fannie Mae and Freddie Mac to have living wills, similar to what many large financial institutions must file under federal law.

Under the proposed rule, Fannie and Freddie will have to demonstrate “how core or important business lines would be maintained to ensure continued support for mortgage finance and stabilize the housing finance system, without extraordinary government support to prevent (Fannie or Freddie) from being placed in receivership, indemnify investors against losses, or fund the resolution of (Fannie or Freddie).”

“The rule proposed today is an important step toward a stronger housing finance system. Requiring the Enterprises to develop living wills, helps FHFA fulfill its responsibility to ensure that the failure of an Enterprise would harm neither taxpayers nor the mortgage market,” Director Mark Calabria said. “The proposed rule gives FHFA a tool that supplements its existing statutory authorities to restructure a failed Enterprise so that government does not have to put the Enterprises into conservatorship again.”