On May 3, FHFA published a final rule outlining the parameters for Fannie Mae and Freddie Mac (the Enterprises) to establish Resolution Plans, or “Living Wills.”
The final rule requires the Enterprises to demonstrate how “core or important business lines would be maintained to ensure continued support for mortgage finance and stabilize the housing finance system, without extraordinary government support, to prevent an Enterprise from being placed in receivership, indemnify investors against losses, or fund the resolution of an Enterprise.”
This rule is similar to ones issued by the Federal Reserve Board and the Federal Deposit Insurance Corporation, which requires many large financial institutions to submit living wills. “Just like other large financial institutions, these plans will provide Fannie Mae, Freddie Mac and FHFA with a roadmap for preserving business continuity should they fail again,” said Director Mark Calabria in a statement released alongside the rule.
Additional details on the final rule can be found here.