11/15/2022
There are agencies whose purpose is to ensure that the financial system that supports mortgage loans is in good hands. The Federal Housing Finance Agency, which complements the well-known Federal Housing Administration (FHA), was created for this purpose.
Since we think it is important to know what it does, we will review its main functions.
How did the FHFA come into being?
The Federal Housing Finance Agency is an organism that is just taking its first steps. This is because it was founded a little more than a decade ago (2008), on the occasion of the housing crisis that the United States and several regions of the world went through. This event generated a series of initiatives and policies to prevent it from happening again.
As a result of the HERA or Housing and Economic Recovery Act, this agency is dedicated to the regulation and supervision of Fannie Mae and Freddie Mac.
In addition, it oversees the general operating conditions of the Federal Home Loan Bank System, which includes 11 FHL entities and the Office of Finance.
The main mission of this agency is to ensure that government-sponsored housing companies operate in a safe and sound manner.
This is so that they act as reliable sources of funding and liquidity to facilitate community investment and mortgage lending for the American people.
In addition, the FHFA is part of what is known as the Financial Stability Oversight Council (FSOC). This body is charged with flagging and resolving any risks that may affect the financial stability of the country.
The Federal Housing Finance Agency receives funds from its affiliated institutions and not from Congress.
Functions of the Federal Housing Finance Agency
This agency is an independent body that is not linked to the Federal Housing Administration, which provides mortgage insurance for home purchases. In fact, this agency came to replace the duties formerly assigned to both OFHBO and FHFB.
This means that the FHFA was created to assume the regulatory and legal powers of the aforementioned agencies. Among its expanded powers, it has the power to exercise receivership or conservatorship over government-sponsored enterprises (GSEs).
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The most notorious example of the application of this conservatorship is found in the FHLMC (Federal Home Loan Mortgage Corporation).
The main characteristics of the FHFA are the following:
- This federal agency complies with maintaining the availability of credit for Americans and preventing foreclosure for each of these loans.
- The Federal Housing Finance Agency is dedicated to reducing the level of risk to taxpayers. To this end, it encourages the participation of private capital in the housing market.
- This agency is concerned with establishing a new securitization infrastructure for single-family homes through Freddie Mac and Fannie Mae. This initiative could eventually be adjusted to be implemented in the secondary market.
Federal Home Loan Bank System
The Federal Home Loan Bank System was created out of the Federal Home Loan Bank Act as a government-sponsored enterprise (GSE) intended to support mortgage financing and community investment.
It comprises 11 major districts throughout the United States. This system provides its members: credit unions, thrifts, commercial banks, insurers and community development financial institutions with different types of funds.
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These can be for short-term liquidity, mortgages, asset/debt management and additional capital for housing finance.
Since almost 80% of lending institutions rely on this system, the FHFA conducts annual on-site evaluations and off-site monitoring of the Funding Office and FHL banks.
Moreover, this agency oversees activities related to affordable housing and community investment. This includes affordable housing program allocations.
FHFA's Recent Accomplishments
The work of this institution does not cease, and some of its latest improvements are worth noting:
- The introduction of the Mortgage Assistance App, which simplifies paperwork and matching requirements, reducing stress for applicants.
- Improved access to credit for limited English proficient (LEP) mortgage applicants. This includes a multi-year language plan that addresses the most important issues during the process for non-English speakers.
- Increasing transparency, along with understanding of the housing finance market, through the distribution of relevant data and indicators, such as the House Price Index, monthly interest rate survey, and public use databases, among others.
Entities such as the Federal Housing Finance Agency serve to safeguard your interests. If you would like more information on other similar agencies, you can also find them in the Busconomico comparator.
Español: Qué es la Agencia Federal de Financiamiento de Vivienda (FHFA)