CONGRESS

F E D E R A L H O U S I N G F I N A N C E O V E R S I G H T B O A R D A S S E S S M E N T
Federal Housing Finance Oversight
Board Assessment June 2016
Section 1103 of the Housing and Economic Recovery Act (HERA) of 2008 requires that the
Federal Housing Finance Agency (FHFA) Director’s Annual Report to Congress (Annual Report)
include an assessment of the Federal Housing Finance Oversight Board or any of its members
with respect to:
• The safety and soundness of the regulated entities;
• Any material deficiencies in the conduct of the operations of the regulated entities;
• The overall operational status of the regulated entities; and
• An evaluation of the performance of the regulated entities in carrying out their
respective missions.
FHFA’s Annual Report provides a detailed review of the issues for Fannie Mae and Freddie Mac (the
Enterprises) and the Federal Home Loan Bank (FHLBank) System as a basis for this assessment.
Enterprises
The Enterprises continue to operate under conservatorship, as they have since 2008. The U.S.
Department of the Treasury (Treasury Department) continues to provide the Enterprises with financial
support through the Senior Preferred Stock Purchase Agreements (PSPAs) that were agreed to at the time
the Enterprises entered conservatorship. Through year-end 2015, the Enterprises’ cumulative draws
under the PSPAs totaled $187.5 billion, and the Enterprises had paid $241.3 billion in cumulative cash
dividends to the Treasury Department. Under the terms of the PSPAs, the payment of dividends does not
offset or pay down prior draws from the Treasury Department by the Enterprises. The Enterprises continue
to operate with a commitment of financial support from the Treasury Department under the PSPAs
of $258 billion.
In 2015, the Enterprises generated net income of $17.3 billion, down from $21.9 billion in 2014. The
decline in the Enterprises’ 2015 earnings reflects reduced litigation settlement income relative to the prior
year. The Enterprises’ 2015 earnings also reflect fair value losses on derivatives used to manage interest
rate risk due to declines in longer term interest rates. Each Enterprise continues to have a significant but
declining exposure to credit losses from mortgages originated in the several years prior to conservatorship.
Revenue from guarantee fees has made up an increasing portion of the Enterprises’ net interest
income in recent years as their net interest income from their retained mortgage portfolios continued
to decline.
REPORT TO CONGRESS • 2015
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