{
  "id": "R44506",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "R44506",
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  "source": "EveryCRSReport.com",
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      "source": "EveryCRSReport.com",
      "id": 454110,
      "date": "2016-07-07",
      "retrieved": "2016-09-09T19:14:30.422767",
      "title": "FHFA\u2019s Administrative Reform of Fannie Mae, Freddie Mac, and the Housing Finance System",
      "summary": "Housing finance reform remains one of the major unresolved issues stemming from the financial crisis. Congress has held hearings and marked up bills related to reform, but so far only modest structural changes have been enacted. The Federal Housing Finance Agency (FHFA) has used its regulatory authority to enact certain policy changes. \nFHFA is the regulator and conservator of Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs) that play a significant role in the housing finance system. FHFA has leveraged the authority that it has over the GSEs and their market dominance to implement changes to the housing finance system that could shape the future course of the system. \nThe FHFA-directed restructuring of the system focuses on three main policy questions:\nWho will bear credit risk in the future?\nHow will mortgage-backed securities (MBS) be issued? and \nWhat will the MBS look like once issued?\nThe Credit Risk Transactions (CRT) are FHFA\u2019s efforts to modify who bears credit risk. The GSEs guarantee that investors in their MBS will receive timely payment of principal and interest. In doing so, the GSEs absorb the credit risk\u2014the risk that a borrower would not make the required mortgage payment. Because of the contractual agreements that the Department of the Treasury has entered into with the GSEs in which Treasury has agreed to provide them with financial support, taxpayers are potentially exposed to the GSEs\u2019 credit risk. To reduce this risk, FHFA has directed the GSEs to transfer credit risk to other private investors. Congress is interested in several aspects of risk sharing, including the methods through which risk is being shared, how much risk is being shared, the effect of sharing risk on credit availability, and how effective the transactions are at protecting the taxpayer. \nThe Common Securitization Platform (CSP) is FHFA\u2019s attempt to improve the way in which MBS are issued. Fannie Mae and Freddie Mac each have their own securitization method (i.e., the process of transforming a pool of mortgages into MBS), but FHFA determined that their technology associated with creating and issuing MBS is outdated. Rather than invest in updating two systems, FHFA directed the GSEs to create one platform for securitizing mortgages. Congress is interested in multiple aspects of the CSP, including whether other private companies will be able to access it as well as the CSP\u2019s future ownership structure.\nThe Single Security is FHFA\u2019s initiative to alter the type of MBS that would be issued in the future. Currently, each GSE issues its own, distinct MBS. Fannie MBS and Freddie MBS are different securities governed by different legal contracts and trade at different prices. The Single Security would be a single MBS that the GSEs could issue through the CSP and would be traded in a single market. FHFA argues that the Single Security would enhance the liquidity of the MBS market\u2014the ease with which MBS can be bought and sold\u2014and remove the subsidy that Freddie Mac currently offers to keep its MBS competitive. Congress is interested in whether the Single Security will be effective in promoting liquidity in the MBS market and in what effect the Single Security will have on competition between the GSEs. \nThese three topics, although important, are just a subset of the many issues facing Congress as it considers broader reform of the housing finance system. Because FHFA\u2019s actions touch on the key issues of reform and, in some cases, are incorporated into legislative reform proposals, many in Congress have followed FHFA\u2019s actions closely. In addition, the Senate Banking Committee has reported the Financial Regulatory Improvement Act of 2015 (S. 1484), legislation that would codify FHFA\u2019s actions in some cases and would modify FHFA\u2019s actions in others.",
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      "topics": [
        {
          "source": "IBCList",
          "id": 2869,
          "name": "Housing Finance Reform"
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    {
      "source": "EveryCRSReport.com",
      "id": 452862,
      "date": "2016-05-23",
      "retrieved": "2016-06-21T21:15:41.725819",
      "title": "FHFA\u2019s Administrative Reform of Fannie Mae, Freddie Mac, and the Housing Finance System",
      "summary": "Housing finance reform remains one of the major unresolved issues stemming from the financial crisis. Congress has held hearings and marked up bills related to reform, but so far only modest structural changes have been enacted. The Federal Housing Finance Agency (FHFA) has used its regulatory authority to enact certain policy changes. \nFHFA is the regulator and conservator of Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs) that play a significant role in the housing finance system. FHFA has leveraged the authority that it has over the GSEs and their market dominance to implement changes to the housing finance system that could shape the future course of the system. \nThe FHFA-directed restructuring of the system focuses on three main policy questions:\nWho will bear credit risk in the future?\nHow will mortgage-backed securities (MBS) be issued? and \nWhat will the MBS look like once issued?\nThe Credit Risk Transactions (CRT) are FHFA\u2019s efforts to modify who bears credit risk. The GSEs guarantee that investors in their MBS will receive timely payment of principal and interest. In doing so, the GSEs absorb the credit risk\u2014the risk that a borrower would not make the required mortgage payment. Because of the contractual agreements that the Department of the Treasury has entered into with the GSEs in which Treasury has agreed to provide them with financial support, taxpayers are potentially exposed to the GSEs\u2019 credit risk. To reduce this risk, FHFA has directed the GSEs to transfer credit risk to other private investors. Congress is interested in several aspects of risk sharing, including the methods through which risk is being shared, how much risk is being shared, the effect of sharing risk on credit availability, and how effective the transactions are at protecting the taxpayer. \nThe Common Securitization Platform (CSP) is FHFA\u2019s attempt to improve the way in which MBS are issued. Fannie Mae and Freddie Mac each have their own securitization method (i.e., the process of transforming a pool of mortgages into MBS), but FHFA determined that their technology associated with creating and issuing MBS is outdated. Rather than invest in updating two systems, FHFA directed the GSEs to create one platform for securitizing mortgages. Congress is interested in multiple aspects of the CSP, including whether other private companies will be able to access it as well as the CSP\u2019s future ownership structure.\nThe Single Security is FHFA\u2019s initiative to alter the type of MBS that would be issued in the future. Currently, each GSE issues its own, distinct MBS. Fannie MBS and Freddie MBS are different securities governed by different legal contracts and trade at different prices. The Single Security would be a single MBS that the GSEs could issue through the CSP and would be traded in a single market. FHFA argues that the Single Security would enhance the liquidity of the MBS market\u2014the ease with which MBS can be bought and sold\u2014and remove the subsidy that Freddie Mac currently offers to keep its MBS competitive. Congress is interested in whether the Single Security will be effective in promoting liquidity in the MBS market and in what effect the Single Security will have on competition between the GSEs. \nThese three topics, although important, are just a subset of the many issues facing Congress as it considers broader reform of the housing finance system. Because FHFA\u2019s actions touch on the key issues of reform and, in some cases, are incorporated into legislative reform proposals, many in Congress have followed FHFA\u2019s actions closely. In addition, the Senate Banking Committee has reported the Financial Regulatory Improvement Act of 2015 (S. 1484), legislation that would codify FHFA\u2019s actions in some cases and would modify FHFA\u2019s actions in others.",
      "type": "CRS Report",
      "typeId": "REPORTS",
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      "topics": [
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          "source": "IBCList",
          "id": 2869,
          "name": "Housing Finance Reform"
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  "topics": [
    "Economic Policy"
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}