Financial Institution Insolvency: Federal Authority over Fannie Mae, Freddie Mac, and Depository Institutions [September 10, 2008] [open pdf - 174KB]
"On September 7, 2008, the Secretary of the Treasury announced that the Federal Housing Finance Agency (FHFA), the newly installed regulator of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), had been appointed conservator of the two enterprises. Until the enactment of the Housing and Economic Recovery Act of 2008 (P.L. 110- 289), there was no clear statutory authority for dealing with the insolvency of either or both of these two mortgage giants. Among the reforms included in P.L. 110-289 were extensive provisions providing the FHFA with powers that substantially parallel those accorded the Federal Deposit Insurance Corporation (FDIC) to deal with every aspect of insolvencies of any bank or thrift institution that holds federally insured deposits. The government's takeover of Fannie Mae and Freddie Mac is expected to have a great impact upon the mortgage market. Because it is the model on which the FHFA's conservatorship and receivership authorities are based and because there has been sufficient experience with it to provide guidance as to how the FHFA is likely to operate, the FDIC's bank and thrift insolvency process is set forth in some detail. That is followed by an exposition of the authority given to FHFA in P.L. 110-289. The issues discussed include how the process is initiated; when a conservatorship is selected; when a receivership is selected; any differences between the two; when judicial review is available; what priorities are established for claims against a receivership; and what authority exists for repudiating claims."
CRS Report for Congress, RL34657