FEDERAL

overseen by FHFA. As conservator, FHFA has
undertaken to preserve and conserve the assets of the
enterprises and restore them to safety and soundness.
FHFA also has assumed the powers of the boards of
directors, officers, and shareholders; however, the dayto-day
operational decision making of each company
is still with the enterprises’ existing management.
Credit Unions: Member-owned, not-for-profit
financial cooperatives that provide savings, credit,
and other financial services to their members. Credit
unions pool their members’ savings deposits and
shares to finance their own loan portfolios rather than
rely on outside capital. Members benefit from higher
returns on savings, lower rates on loans, and fewer
fees on average.
Default: Occurs when a mortgagor misses one or
more payments.
Deferred Tax Assets: Deferred tax assets are
recognized for temporary differences that will result
in deductible amounts and for carryforwards. For
example, a temporary difference is created between
the reported amount and the tax basis of a liability
for estimated expenses if, for tax purposes, those
estimated expenses are not deductible until a future
year.
Derivatives: Securities whose value depends on that
of another asset, such as a stock or bond. They may
be used to hedge interest rate or other risks related to
holding a mortgage.
Derivative Gains (Losses): The enterprises acquire
and guarantee primarily longer-term mortgages and
securities that are funded with debt instruments. The
companies manage the interest rate risk associated
with these investments and funding activities with
derivative agreements. The gains (losses) on derivative
agreements are caused by changes in interest rates
that, in turn, cause a net increase (decrease) in the fair
value of these agreements.
Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010: Legislation that intends to
promote the financial stability of the United States
by improving accountability and transparency in the
financial system, ending “too big to fail,” protecting the
American taxpayer by ending bailouts, and protecting
consumers from abusive financial services practices.
Emergency Economic Stabilization Act: A 2008
statute that authorizes Treasury to undertake specific
measures to provide stability and prevent disruption
in the financial system and the economy. It also
provides funds to preserve homeownership.
Equity: In the context of residential mortgage
finance, equity is the difference between the fair
market value of the borrower’s home and the
outstanding balance on the mortgage and any other
debt secured by the home.
Fannie Mae: A federally chartered corporation that
purchases residential mortgages and converts them
into securities for sale to investors; by purchasing
mortgages, Fannie Mae supplies funds to lenders so
they may make loans to homebuyers.
Federal Home Loan Banks: The FHLBanks are
12 regional cooperative banks that U.S. lending
institutions use to finance housing and economic
development in their communities. Created by
Congress, the FHLBanks have been the largest source
of funding for community lending for eight decades.
The FHLBanks provide funding to other banks but
not directly to individual borrowers.
Federal Housing Administration: Part of HUD,
FHA insures residential mortgages made by approved
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