Federal Housing Finance Agency – Definition

Cite this article as:"Federal Housing Finance Agency – Definition," in The Business Professor, updated January 24, 2020, last accessed August 4, 2020, https://thebusinessprofessor.com/lesson/federal-housing-finance-agency-definition/.

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Federal Housing Finance Agency (FHFA)

The  Federal Housing Finance Agency is created under the Housing and Economic Recovery Act (HERA, 2018). It is an independent agency saddled with the responsibility to oversee Fannie Mae and Freddie Mac bank, the Federal Home Loan (FHL), and also to ensure the U.S housing finance system is stable.

A Little More on What is the Federal Housing Finance Agency (FHFA)

The Federal Housing Finance Agency has been saddled with the office functions of the former  Office of Federal Housing Enterprise Oversight and the Federal Housing Finance Board. Having replaced the above agencies, the FHFA is authorized to place government-sponsored entities into receivership or conservatorship. For example, it has acted as a conservator of the Federal Home Loan Mortgage Corporation. The FHFA  is distinct in terms of functions from the Federal Housing Insurance. Federal Housing Insurance primarily function as mortgage insurance provider.

The FHFA has three goals outlined and they are: maintaining credit availability, reducing tax payer risks, striving to create a new securitization infrastructure for single-family homes through Fannie Mae and Freddie Mac and also preventing foreclosure for all mortgages. The goal of reducing tax payer risks is by encouraging private capital in the mortgage market.

Federal Housing Finance Agency and Secondary Markets

The Federal Housing Finance Agency (FHFA) is a member of the Financial Stability Oversight Council. This council seeks to point and control any risks to the United States’ financial security. FHFA is not funded by the congress but money generated from the regulated agencies.

The FHFA oversees and regulates the activities of the Federal Home Loan (FHL). The Federal Home loan has members such as thrift institutions, credit unions, insurance companies, commercial banks and other financial institutions. The FHL has been able to provide financial support to the U.S. financial institutions and mortgage markets with over $5.9 trillion.

The FHL also provides asset-liability management and liquidity for members’ pertinent needs, also funding for community development projects. This is specifically for its members. 80 percent of U.S. lenders depend on the FHL, they are one of the major financial institutions in the U.S.

Lastly, mortgages and mortgage-backed securities are traded in the secondary mortgage market.

References for  “Federal Housing Finance Agency (FHFA)”

https://en.wikipedia.org/wiki/Federal_Housing_Finance_Agency

https://www.investopedia.com › Investing › Bonds / Fixed Income

https://www.merriam-webster.com/legal/Federal%20Housing%20Finance%20Agency

https://www.britannica.com/topic/Federal-Housing-Finance-Agency

https://definedterm.com/federal_housing_finance_agency_fhfa

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