There are organizations whose purpose is to guarantee that the financial system that supports mortgage loans is in good hands. With this objective, the Federal Housing Finance Agency, which complements the well-known Federal Housing Administration (FHA).
As we consider it important to know what it does, we will review its main functions.
How was the FHFA born?
The Federal Housing Finance Agency is a body that is just in its infancy. This is because was founded just over a decade ago (2008), on the occasion of the real estate crisis that the United States and several regions of the world went through. This event generated a series of initiatives and policies to prevent it from happening again.
Product of the HERA or Housing and Economic Recovery Act, this agency is dedicated to the regulation and supervision of the companies Fannie Mae and Freddie Mac.
In addition, it complies with monitoring the general operating conditions of the Federal Mortgage Loan Banking System, which includes 11 FHL entities and the Financing Office.
In the main mission of this entity it is established that it must ensure that the housing companies sponsored by the government operate in a healthy and safe way.
This in order for them to act like reliable sources of financing and liquidity to facilitate community investment and home loans for the American people.
The FHFA is also part of what is known as the Financial Stability Oversight Board (FSOC). This body is in charge of pointing out and resolving any risk that may affect the financial stability of the country.
The Federal Housing Finance Agency receives funds from its affiliated institutions and not from Congress.
Functions of the Federal Housing Finance Agency
This agency is an independent body that is not linked to the Federal Housing Administration, which provides mortgage insurance for the purchase of homes. In fact, this agency came to replace the tasks that were previously assigned to both the OFHBO and the FHFB.
This means that the FHFA was created to assume the regulatory and legal powers of the aforementioned entities. Among its expanded powers, it has the power to exercise judicial administration or guardianship over government-sponsored companies (GSEs).
The most notorious example of the application of this custody is found in the FHLMC (Federal Home Loan Mortgage Corporation).
The main features of the FHFA are as follows:
- This federal agency complies with maintaining the availability of credit for Americans and avoiding foreclosure for each of these loans.
- The Federal Housing Finance Agency dedicates its efforts to reduce the level of risk for taxpayers. To do this, it encourages the participation of private capital within the real estate market.
- This body is concerned with establishing a new securing infrastructure for single family homes through Freddie Mac and Fannie Mae. This initiative could eventually be adjusted to be implemented in the secondary market.
Federal Home Loan Bank System
The Federal System of Banks for Mortgage Loans was created from the Federal Home Loan Bank Act as a government sponsored enterprise (GSE) intended to support mortgage financing and community investment.
It is made up of 11 major districts throughout the United States. This system provides its members: credit unions, savings entities, commercial banks, insurance companies and financial institutions for community development with different kinds of funds.
They can be for short-term liquidity, mortgages, asset / debt management, and additional equity for home financing.
Since almost 80% of the lending institutions depend on this system, the FHFA performs annual on-site evaluations and external monitoring of the Finance Office and the FHL banks.
On the other hand, this agency supervises the activities related to accessible housing and community investment. This includes program allowances for affordable housing.
Recent FHFA Accomplishments
The work of this institution does not stop and it is worth highlighting some of its latest improvements:
- The introduction of the mortgage assistance app, which simplifies paperwork and matching requirements, reducing stress for applicants.
- The improving access to credit for mortgage applicants with limited English (LEP). This includes a multi-year language plan that addresses the most important issues during the process for non-English speakers.
- The increased transparency, together with the understanding of the housing financing market, through the distribution of relevant data and indicators, such as the Housing Price Index (House Price Index), the monthly interest rate survey and databases for public use, among others.
Entities such as the Federal Housing Financing Agency serve to protect your interests. If you want more information about other similar organisms, you can also find them in the Business Blogcomparator.