September 7 2008 will be remembered by US capital markets participants as the day on which the government took over operation of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Association (Freddie Mac). To be precise, the Director of the Financial Housing Finance Authority (FHFA) placed Fannie Mae and Freddie Mac into conservatorship. The appointment of the FHFA as conservator was based on legislative provisions that had been enacted in the summer under the Housing and Economic Recovery Act of 2008. The announced purpose of the conservatorship is to assure the entities' safety and soundness while providing stability and liquidity to the housing market. In addition, the US Treasury agreed to purchase preferred shares of both entities and to provide additional capital support to them under certain scenarios, as well as provide short-term secured credit to them when, and if, needed, and purchase mortgage-backed securities issued by them in the secondary market.
September 30 2008
