FHFA proposes Enterprises living will requirement

The Federal Housing Finance Agency (FHFA) has announced that it has issued a notice of proposed rulemaking that would require Fannie Mae and Freddie Mac (the Enterprises) to develop credible resolution plans, also known as living wills. These resolution plans would facilitate a rapid and orderly resolution should FHFA again have to be appointed their receiver under the Housing and Economic Recovery Act of 2008.

The proposed rule is similar to those issued by the Federal Reserve Board and the Federal Deposit Insurance Corporation under the Dodd–Frank Act, which requires many large financial institutions to submit living wills. The Department of Treasury's 2019 Plan highlighted the need for a credible resolution framework for the Enterprises, and the Financial Stability Oversight Council endorsed Enterprise living wills in the early fall of 2020. Under the proposed rule, the Enterprises must 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 an Enterprise from being placed in receivership, indemnify investors against losses, or fund the resolution of an Enterprise.

Comments will be accepted for 60 days following Federal Register publication.