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Mortgage Market Notes

Mortgage Market Note 10-1: U.S. Treasury Support for Fannie Mae and Freddie Mac

Published: 1/20/2010

​The Housing and Economic Recovery Act of 2008 (HERA) authorized the Secretary of the Treasury to support Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (FHLBs) by purchasing obligations and other securities from those government-sponsored enterprises (collectively, the housing GSEs). HERA gave the Secretary broad authority to determine the conditions and amounts of such purchases.

On September 7, 2008, the Treasury Department exercised that authority by initiating individual Senior Preferred Stock Purchase Agreements (SPAs) through the Federal Housing Finance Agency (FHFA) as conservator with Fannie Mae and Freddie Mac (the Enterprises). In addition, the Treasury Department established two special facilities to purchase obligations of the housing GSEs: one to purchase GSE-guaranteed mortgage-backed securities (the GSE MBS Purchase Facility) and the other to purchase GSE debt (the GSE Credit Facility). The programs established by the Treasury Department under HERA were intended to improve investor confidence in the ability of each housing GSE to continue to provide liquidity to mortgage markets and to meet its obligations. Investor confidence is essential to liquid and well-functioning mortgage markets, which in turn benefit homeowners and qualified mortgage borrowers by lowering borrowing costs and supporting home prices.

On May 6, 2009, amendments were made that, relative to the initial agreements, doubled the Treasury commitment to each Enterprise, increased the maximum size of each Enterprise’s retained mortgage portfolio, and allowed each Enterprise to increase its indebtedness. On December 24, 2009, the Treasury Department announced further amendments to the SPAs which included additional financial support for each Enterprise through the end of 2 2012 and changes to the limits on their retained mortgage portfolios. Also on December 24, the Treasury also confirmed the expiration of the GSE MBS Purchase Facility and the GSE Credit Facility.

The Federal Reserve also has supported the Enterprises and the mortgage markets. On November 25, 2008, the Federal Reserve announced it would purchase $100 billion of debt issued by the housing GSEs and $500 billion of MBS guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. On March 18, 2009, the Federal Reserve increased those commitments to $200 billion for the purchase of housing GSE debt and $1.25 trillion for the purchase of MBS. On November 4, 2009, the Federal Reserve reduced its commitment to purchase GSE debt to $175 billion. The Federal Reserve expects that its purchases of both GSE debt and MBS will extend through March 2010.

This Mortgage Market Note answers three basic questions about the SPAs:

  • What do they do?
  • How do they work? and
  • When do they expire?

In addition, this Mortgage Market Note answers the following questions about the expired GSE Credit Facility and GSE MBS Purchase Facility:

  • What did they do?
  • When did they expire?
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