Fannie Mae, Freddie Mac Getting Receivership Contingency Plan

by 23 Jul 2012

(Bloomberg) -- The U.S. regulator overseeing Fannie Mae, Freddie Mac and the Federal Home Loan Banks has hired a consulting firm to create contingency plans for taking the mortgage-finance firms into receivership, according to contract documents.

The plan is part of “ordinary regulatory activities” and does not indicate that the Federal Housing Finance Agency intends to take the companies or the banks into receivership, agency spokeswoman Denise Dunckel said. Receivership would involve winding down the companies and selling off their assets.

“This planning activity is routine and does not indicate any condition of the current status of the regulated entities,”Dunckel said.

Fannie Mae and Freddie Mac (FMCC) have been operating under U.S. conservatorship since September 2008, when investments in risky loans pushed them to the brink of insolvency. Under conservatorship, as opposed to receivership, the two taxpayer-owned companies continue to operate while having drawn almost $190 billion in aid from the U.S. Treasury.

The FHFA in May signed a contract with New York-based PricewaterhouseCoopers LLP to “recommend guidelines, procedures and other protocols the FHFA should have in place prior to placing any regulated entity into receivership,” according to the document.

The document said PricewaterhouseCoopers will “develop a framework for the FHFA to use in building the capacity” to liquidate Fannie Mae, Freddie Mac, or any of the 12 regional U.S. Home Loan Banks.

Read full article from Bloomberg

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