FHFA Issues Final Rule Requiring GSE Resolution Planning

The Federal Housing Finance Agency today finalized a rule requiring Fannie Mae and Freddie Mac to develop resolution plans to facilitate their rapid and orderly resolution in the event that the FHFA is appointed receiver—similar to the resolution plans that the nation’s largest banks are required to develop. The plans should assume severely adverse economic conditions, FHFA said, and should not assume that the provision or continuation of extraordinary support by the United States government.

As part of the resolution planning process, the GSEs will identify core business lines, which FHFA defined as “those business lines of the Enterprise that plausibly would continue to operate in the limited-life regulated entity,” as well as associated operations, services, functions and supports necessary for the core business lines to be continued.

Fannie and Freddie must submit their initial resolution plans two years after the rule takes effect, and subsequent plans every two years thereafter. FHFA will review the plans and determine whether additional information is needed, identify deficiencies or “shortcomings”—concerns identified in the plans that do not rise to the level of deficiencies—and provide feedback and an opportunity for resubmission. FHFA also added to the final rule a 12-month notification requirement if it decides to alter the resolution plan submission date and reserved the authority to further refine submission requirements.