Office of Federal Housing Enterprise Oversight (OFHEO)

What is the Office of Federal Housing Enterprise Oversight (OFHEO)?

The Office of Federal Housing Enterprise Oversight (OFHEO) was the regulatory body that recently directed Fannie Mae and Freddie Mac until the two government-sponsored enterprises (GSE) went into conservatorship in 2008. The Federal Housing Finance Agency (FHFA) replaced the office following the section of the Housing and Economic Recovery Act of 2008.

Grasping Office of Federal Housing Enterprise Oversight (OFHEO)

The Office of Federal Housing Enterprise Oversight (OFHEO) attempted to guarantee the capital adequacy and financial safety of the two housing GSEs, Fannie Mae and Freddie Mac. The OFHEO was laid out as an independent entity inside the Department of Housing and Urban Development (HUD) by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992.

OFHEO's mission was to advance housing and a robust national housing finance system by guaranteeing the safety and sufficiency of Fannie and Freddie. One way the OFHEO did this was by setting annual conforming loan limits. In 2008, the OFHEO (alongside the Federal Housing Finance Board and other working divisions) was annulled to make the FHFA.

The FHFA absorbed the regulatory authority of the elements it replaced, including the power to place the housing GSEs into receivership or conservatorship. Other GSEs incorporate the Federal Home Loan Banks and Federal Farm Credit Banks, among others.

The Conservator Role

The FHFA has filled in as conservator of Fannie Mae and Freddie Mac starting around 2008. This permitted government intervention in response to financial tensions from the decay of the housing market during the Great Recession. Without this intervention, Fannie and Freddie Mac couldn't meet their missions. However the U.S. government doesn't expressly guarantee the housing GSEs, numerous investors accept there exists an implicit guarantee that the government won't permit them to fail.

Fannie and Freddie's aggregate loans in the secondary market make them among the biggest financial institutions in the United States. Their collapse could lead to an extreme market downturn, which could cause an economic crisis. Following the 2007-2008 subprime meltdown, Fannie Mae and Freddie Mac received federal assistance to alleviate the economic impact of subprime loan defaults.

Starting around 2019, the FHFA is chasing after these three objectives in its conservatorship of Fannie and Freddie:

1. Foster competitive, liquid, efficient, and strong national housing finance markets that support homeownership and affordable rental housing.
2. Operate in a safe and sound way suitable for the GSEs in conservatorship.
3. Plan for the inevitable exit of the GSEs from conservatorship.

Secondary Market and the Federal Home Loan Banking System

The secondary mortgage market trades existing mortgages and mortgage-backed securities. The Federal Home Loan Bank System that FHFA directs gives funding to the U.S. mortgage markets and financial institutions. It delivers a source of financing to part thrift institutions, commercial banks, credit unions, insurance companies, and certified community development financial institutions. These funds work with mortgages and asset-liability management, liquidity for short-term needs, and extra funds for housing finance and community development.

The director of FHFA serves on the Financial Stability Oversight Council, which is accused of recognizing risks and answering emerging dangers to the stability of the U.S. financial system.

Features

• The Office of Federal Housing Enterprise Oversight (OFHEO) managed Fannie Mae and Freddie Mac until the Federal Housing Finance Agency (FHFA) replaced it in 2008.
• The FHFA absorbed the regulatory authority of the OFHEO and different elements it replaced, including the power to place the housing GSEs into receivership or conservatorship.
• OFHEO was laid out as an independent entity inside the Department of Housing and Urban Development in 1992.