The Federal Housing Finance Agency today released its strategic plan for fiscal years 2021-2024. The plan outlines three broad strategic goals: ensuring safe and sound regulated entities through world-class supervision, fostering competitive, liquid, efficient and resilient national housing finance markets, and positioning FHFA as a model of operational excellence. A key part of the strategic plan involves responsibly ending the conservatorships of Fannie Mae and Freddie Mac and allowing them to build adequate capital.
In addition to outlining strategic goals, the plan also addresses the challenges and risks that could hinder the achievement of these goals, including the current economic environment due to COVID-19. FHFA warned that “the Enterprises currently lack the capital to withstand a serious housing downturn,” noting that the GSEs’ leverage ratio after the second quarter of 2020 “was over 200 to 1.” This degree of leverage over the long term could ultimately hinder FHFA’s ability to ensure that Fannie and Freddie are able to respond to market events and downturns, the agency said.
FHFA also called on Congress to address the need for comprehensive housing finance reform, and for flexibility that would enable FHFA to simplify its proposed capital framework.