Housing & Government 

Sponsored Enterprises

FY 2016 

President’s Budget

February 2, 2015
GSEs - 2

Table of Contents

Section 1 – Purpose ....................................................................................................................... 3

1A – Mission Statement.............................................................................................................. 3

1.1 – Program Account Summary............................................................................................... 3

1.2 – Financing Account Summary ............................................................................................ 3

1.3 – Mandatory Receipts Summary........................................................................................... 4

1B – Vision, Priorities and Context............................................................................................ 4

1C - Credit Reform Account Descriptions.................................................................................. 7

Section 2 – Budget Adjustments and Appropriation Language............................................... 8

2A- Budget Increases and Decreases Description ...................................................................... 8

2B – Appropriations Language and Explanation of Changes..................................................... 8

2C – Legislative Proposals.......................................................................................................... 8

Section 3 – Budget and Performance Plan ................................................................................. 9

3A – Senior Preferred Stock Purchase Agreements (PSPAs)..................................................... 9

3.1.1 – Senior PSPAs Budget and Performance Report and Plan .............................................. 9

3B – New Issue Bond Program................................................................................................... 9

3.1.2 – New Issue Bond Program Budget and Performance Report and Plan.......................... 10

3C – Temporary Credit and Liquidity Program........................................................................ 10

3.1.3 – Temporary Credit and Liquidity Program Budget and Performance Report and Plan. 11
GSEs - 3

Section 1 – Purpose 

1A – Mission Statement

To provide stability to financial markets and promote mortgage affordability while also 

protecting the taxpayer, Treasury implemented four programs with respect to two Government 

Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, as well as the Federal Home Loan 

Banks (FHLBs). The Senior Preferred Stock Purchase Agreements (PSPAs) with Fannie Mae 

and Freddie Mac are currently active, while Treasury completed the orderly disposition of the 

Mortgage-Backed Securities (MBS) Purchase Program in March 2012.

In addition to these programs, Treasury has purchased securities of Fannie Mae and Freddie Mac 

backed by new housing bonds issued by the Housing Finance Agencies (HFAs), through the 

New Issue Bond Program (NIBP). Treasury also purchased participation interests in temporary 

credit and liquidity facilities, which are obligations of Fannie Mae and Freddie Mac as part of the 

Temporary Credit and Liquidity Program (TCLP) to provide backstop liquidity and credit for 

state and local HFAs. Together, the NIBP and the TCLP comprise the Housing Finance 

Agencies Initiative (HFA Initiative).

1.1 – Program Account Summary

Dollars in Millions

 FY 2014 FY 2015 FY 2016 FY 2015 to FY 2016

 Actual Estimated Estimated $ Change % Change

AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT

Obligations

Senior Preferred Stock Purchase 

Agreements Account 0 0 0 0 0.00%

GSE MBS Purchase Program Account 4 178 3 -175 -98.31%

Total Obligations $4 $178 $3 -175 -98.31%

Budget Authority 

Senior Preferred Stock Purchase 

Agreements Account 258 258 258 0 0.00%

GSE MBS Purchase Program Account 8 178 3 -175 -98.31%

Total Budget Authority $266 $436 $261 -175 -40.14%

Outlays

Senior Preferred Stock Purchase 

Agreements Account 0 0 0 0 0.00%

GSE MBS Purchase Program Account 4 228 3 -225 -98.68%

Total Outlays $4 $228 $3 -225 -98.68%

1.2 – Financing Account Summary

Dollars in Millions

 FY 2014 FY 2015 FY 2016 Change % Change

 Actual Estimated Estimated FY 2015 to FY 

2016 FY 2015 to FY 2016

AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT

State HFA NIPB & TCLP

Obligations 399 301 284 -17 -5.65%

Collections 953 1,000 736 -264 -26.40%

Financing Authority (net) -387 -699 -453 246 35.19%

Financing Disbursements (net) -553 -699 -284 415 59.37%
GSEs - 4

1.3 – Mandatory Receipts Summary

Dollars in Millions

FY 2014 FY 2015 FY 2016 FY 2015 to FY 2016

Actual Estimated Estimated $ Change % Change

AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT

Senior Preferred Dividend Payments from Fannie Mae and Freddie Mac

Receipts 72,472 23,352 19,812 -3,540 -15.16%

Additional G Fee Collected Per Temporary Payroll Tax Cut Continuation Act

Receipts 1,921 2,436 2,739 302 12.40%

1B – Vision, Priorities and Context

FY 2016 Priorities:

• To provide stability to financial markets.

• To prevent disruptions to the availability of mortgage credit for American homebuyers.

• To maintain investor confidence in the GSEs and in state and local HFAs.

• To restore the capacity of state and local HFAs to provide affordable housing resources to 

working families at the state and local level. 

Senior Preferred Stock Purchase Agreements (PSPAs)

Section 1117 of the Housing and Economic Recovery Act of 2008 (HERA) granted temporary 

authority for the Treasury to purchase any obligations and other securities issued by Fannie Mae, 

Freddie Mac, and any Federal Home Loan Bank on such terms and conditions and amounts as 

the Treasury may determine. On September 7, 2008, the Secretary of the Treasury made the 

determination that the Treasury’s exercise of its purchase authority under HERA was necessary 

to provide stability to the financial markets, prevent disruptions in the availability of mortgage 

finance, and protect taxpayers.

Vision: The function of the PSPAs is to enhance market stability by providing holders of Fannie 

Mae and Freddie Mac securities with confidence that the GSEs will remain solvent. This 

commitment is also designed to eliminate any mandatory triggering of receivership of the GSEs 

under HERA. To this end, the PSPAs are an effective means of averting systemic risk while at 

the same time protecting the taxpayer. 

Priorities: Market stability is central to the mission of the Treasury. In this regard, the following 

priorities have been identified for mission success:

• To provide stability to the GSE securities market.

• To maintain the solvency of the GSEs.

Program History: During FY 2008, the Department of the Treasury entered into the PSPAs 

with Fannie Mae and Freddie Mac. The PSPAs were indefinite in duration and had a funding 

commitment cap of $100 billion each. These agreements were amended in May 2009 to provide 

a funding commitment cap of $200 billion each, and further amended in December 2009, to 

replace the fixed-dollar amount funding commitment cap with a formulaic cap that ended

December 31, 2012, at which time the maximum amount became fixed. Based on the financial 

results reported by Fannie Mae and Freddie Mac as of December 31, 2012 and under the terms of 

the PSPAs, the cumulative funding commitment cap for Fannie Mae was set at $233.7 billion 
GSEs - 5

and the cumulative funding commitment cap for Freddie Mac was set at $211.8 billion. In 

exchange for entering into these agreements with these two GSEs, Treasury immediately 

received $1 billion of senior preferred stock in each GSE and warrants for the purchase of 

common stock of each GSE representing 79.9 percent of the common stock of each GSE on a 

fully-diluted basis at a nominal price. No taxpayer money was spent to receive the senior 

preferred stock.

The PSPAs were further amended in August 2012. The changes included: replacing the fixed 10 

percent dividend with a quarterly payment based on the net worth of the GSEs; increasing the 

rate at which the GSEs must reduce their retained investment portfolio balance to 15 percent in 

place of 10 percent per year; and requiring each GSE to submit to Treasury an annual risk 

management plan that details their respective strategies for reducing their enterprise-wide risk 

profile. The change to the dividend payment structure eliminated the need for the GSEs to make 

PSPA draws from Treasury after making dividend payments to Treasury. Since the original 

dividend provision threatened to erode the amount of the Treasury commitment available to the 

GSEs, this amendment helps to maintain the stability of the housing market by preserving the 

continued solvency of the GSEs.

Program Outlook: Under the PSPAs, Treasury helped maintain the solvency of the GSEs with

its $187.5 billion cumulative investment as of December 31, 2014. Treasury forecasts that it will

not make any payments under the PSPAs in FY 2015. Treasury forecasts that it will receive 

approximately $23.4 billion in dividends in FY 2015.

Housing Finance Agencies Initiative

State and local Housing Finance Agencies (collectively, the “HFAs”) are agencies or authorities 

created by state law that are charged with providing affordable mortgage financing for low- and 

moderate-income home buyers and providing financing for multifamily projects for low- and 

very-low income renters. In addition, HFAs provide homeownership education and allocate low 

income housing tax credits. 

HFAs have historically played a central role in providing a safe, sustainable path to 

homeownership. Through the course of the housing downturn, the HFAs experienced a number 

of challenges including a lack of liquidity support for existing variable rate demand bonds, losses 

on mortgages, and downgrades of re-insurance providers. Historically, HFAs have funded their 

activities by issuing tax-exempt mortgage revenue bonds and keeping the associated mortgage 

collateral produced on HFA balance sheets. The bond performance of HFAs has generally been 

strong. However, due to the uncertainties and strain throughout the housing sector during the 

financial crisis and the widening of spreads in the tax-exempt market, HFAs experienced 

challenges in issuing new bonds to fund new mortgage lending.

To provide stability to the financial markets and promote mortgage affordability while at the 

same time protecting the taxpayer, Treasury implemented two programs in December 2009 as 

part of the Housing Finance Agencies Initiative – the New Issue Bond Purchase Program (NIBP) 

and the Temporary Credit and Liquidity Program (TCLP). 
GSEs - 6

New Issue Bond Program

The NIBP has provided temporary financing for HFAs to issue new housing bonds. Treasury 

purchased securities of Fannie Mae and Freddie Mac backed by HFA housing bonds, with the 

funding placed in escrow to be converted into new mortgages prior to the end of calendar year 

2012. This allowed the HFAs to issue new housing bonds consistent with what they would 

ordinarily have been able to issue with the allocations provided them by Congress absent the 

challenges in housing and related markets. The program supported over one hundred thirty 

thousand new mortgages to low- and moderate-income homebuyers, as well as forty thousand 

new rental-housing units for working families. 

Vision: The NIBP has helped provide stability to financial markets and prevented disruptions in 

mortgage finance availability by providing a temporary supplemental market for newly issued 

HFA housing bonds. The NIBP has enabled HFAs to keep their lending programs active while 

they adapt to changing market conditions. The program supports the availability of mortgage 

credit and affordable rental properties for low- and moderate-income homebuyers and renters. 

Facilitating supply and demand in the housing markets helps to stabilize the HFAs.

Priorities: 

• To help provide stability to the housing market.

• To provide funding to HFAs so that they continue to provide affordable mortgage credit.

• To promote availability and affordability of housing resources for low- and moderate-income 

homebuyers and renters.

• To protect taxpayers.

Program History: In December 2009, the Department of the Treasury entered into a 

Memorandum of Understanding with Fannie Mae, Freddie Mac and the Federal Housing Finance 

Agency (FHFA) outlining the obligations of each party with regard to the HFA Initiative 

transactions. Under the terms of the NIBP, Treasury purchased Fannie Mae and Freddie Mac

securities backed by housing bonds issued by HFAs, with the funding placed in escrow pending 

the origination of new mortgages. Use of escrowed proceeds to finance new mortgages 

originally had to be completed by December 31, 2010; however continued disruptions in the 

HFA bond market led to extensions. After two one-year extensions, HFAs had a deadline of 

December 31, 2012 to use NIBP funds. 

Program Outlook: Treasury purchased approximately $15.3 billion in securities under its 

authority for this program in FY 2010. As of the December 31, 2012 deadline, HFAs had used 

$13.3 billion to finance single and multi-family mortgages, and the remainder had been returned 

to Treasury. As of December 31, 2014, the aggregate balances of NIBP bonds had decreased to 

approximately $8.4 billion.

Temporary Credit and Liquidity Program

Fannie Mae and Freddie Mac administer the TCLP for HFAs to help relieve financial strains 

during the financial crisis. Treasury purchased a participation interest in the Fannie Mae and 

Freddie Mac Temporary Credit and Liquidity Facilities (TCLFs) provided to HFAs under the 

TCLP, thus providing a credit and liquidity backstop. These facilities have helped the HFAs 

maintain their financial health and preserve the viability of the HFA infrastructure so that that 
GSEs - 7

HFAs can continue their Congressionally supported role in helping provide affordable mortgage 

financing for low and moderate income homebuyers, as well as continue their other important 

activities in communities. 

Vision: The TCLP has helped provide stability to financial markets and prevented disruptions in 

mortgage finance availability by helping HFAs relieve current financial strains. The TCLP has 

supported the HFAs through the economic downturn and given them time to develop and 

implement more sustainable financing structures that preserve their critical role in extending 

mortgage financing to assist low- and moderate- income homebuyers and renters.

Priorities:

• To help provide stability to the housing market.

• To provide funding to HFAs so that they can continue to provide affordable mortgage 

financing. To promote availability and affordability of housing resources for low- and 

moderate-income homebuyers and renters.

• To protect taxpayers.

Program History: In December 2009, the Department of the Treasury entered into a 

Memorandum of Understanding with Fannie Mae, Freddie Mac, and FHFA outlining the 

obligations of each party with regard to the HFA Initiative transactions. Under the terms of the 

TCLP, Treasury purchased participation interests in Fannie Mae and Freddie Mac liquidity 

facilities available to support outstanding housing bonds issued by HFAs. At the time of 

execution, $8.2 billion had been allocated to HFAs through the TCLP to use the credit and 

liquidity facilities.

Program Outlook: Treasury incurred approximately $8.2 billion in obligations in FY 2010 that 

were to remain open to the end of calendar year 2012. Due to continued strain on the market for 

HFA liquidity facilities, Treasury granted a three-year extension of the TCLP to the end of 

calendar year 2015 for six HFAs, which was conditioned on Treasury’s approval of the HFA’s 

plans to reduce balances of their bonds covered by TCLP during the extension period. To date 

there have been no draw requests or disbursements from the TCLP and since the extension of the 

TCLP, four additional HFAs have exited the program, leaving two participants. Prior to the 

expiration of the TCLP, Treasury’s obligation will continue to diminish over time as HFAs 

redeem the bonds supported by the program or otherwise reduce their need for Treasury’s 

liquidity support. As of December 31, 2014, the remaining balance of TCLP backed bonds had 

decreased to $737 million.

1C - Credit Reform Account Descriptions

GSE Mortgage-Backed Securities Purchase Program Account: The GSE Mortgage-Backed 

Securities Purchase Program Account records the subsidy costs associated with the GSE MBS 

and HFA purchase programs, which are treated as direct loans for budget execution. The subsidy

amounts are estimated on a present value basis.

HFA Financing Account: As required by the Federal Credit Reform Act of 1990, this nonbudgetary account records all cash flows to and from the Government resulting from the

Treasury HFA Initiative programs. The amounts in the account are a means of financing and are 

not included in the budget totals.
GSEs - 8

Section 2 – Budget Adjustments and Appropriation Language 

2A- Budget Increases and Decreases Description

Not applicable for the Housing Government Sponsored Enterprises. 

2B – Appropriations Language and Explanation of Changes

The Housing Government Sponsored Enterprise Programs and the Housing Finance Agencies 

Initiative Programs do not receive any discretionary appropriation authority from the Congress. 

Therefore, no appropriations language is proposed.

2C – Legislative Proposals

There are no current proposals for amending the enacting legislation.
GSEs - 9

Section 3 – Budget and Performance Plan 

3A – Senior Preferred Stock Purchase Agreements (PSPAs)

(No funding): 

The PSPAs instill confidence in investors that Fannie Mae and Freddie Mac will remain solvent 

entities critical to the functioning of the housing and mortgage markets. Treasury entered into a 

PSPA with each GSE to enable each enterprise to maintain a positive net worth. 

The PSPAs enhance market stability by providing confidence that the GSEs would remain 

solvent to holders of Fannie Mae and Freddie Mac securities, which, in turn, leads to increased 

mortgage affordability. Treasury’s commitment through the PSPAs is also designed to prevent 

triggering mandatory receivership under HERA. To this end, the PSPAs are an effective means 

of averting systemic risk while at the same time protecting the taxpayer’s investment of $187.5 

billion made through December 31, 2014.

In exchange for entering into these agreements with the GSEs, Treasury received $1 billion of 

senior preferred stock in each GSE and warrants for the purchase of common stock of each GSE 

representing 79.9 percent of the common stock of each GSE on a fully diluted basis at a nominal 

price. The GSEs agreed to pay a dividend to Treasury equal to 10 percent per year of the total 

amount of funds that Treasury had provided to the GSEs (plus $1 billion for each GSE).

The dividend provision of each PSPA was amended in August 2012 to support the continued 

solvency of the GSEs. The amendments further supported the continued flow of mortgage credit 

and protected the interests of taxpayers. This amendment replaced the fixed 10 percent dividend 

with a quarterly dividend (if any) based on the positive net worth of the GSEs.

3.1.1 – Senior PSPAs Budget and Performance Report and Plan

Description of Performance:

To ensure the stability of the GSEs, the GSEs make PSPA draws from Treasury at the request of 

FHFA as necessary for each GSE to maintain a positive net worth. Under the PSPAs, Treasury 

has helped to ensure the solvency of the GSEs by providing these entities with $187.5 billion 

cumulative investment as of December 31, 2014. Through December 31, 2014, the GSEs have 

paid $225.4 billion in dividend payments to Treasury. 

3B – New Issue Bond Program

(No funding): 

The function of the NIBP was to help provide stability to financial markets and prevent 

disruptions in mortgage finance availability by providing a temporary supplemental market for 

newly issued HFA housing bonds. By temporarily supplementing private demand for HFA 

production, the NIBP enables HFAs to keep their lending programs active while they adapt to 

changing market conditions. The NIBP supports the availability of mortgage credit and 

affordable rental properties for low- and moderate- income homebuyers and renters. 

Program sized to meet demand - HFAs submitted detailed program participation requests to 

Treasury. In order to scale back the NIBP requests to an acceptable level that could be 

recommended for adoption, a methodology was developed and applied to arrive at final 
GSEs - 10

allocation recommendations under the program for HFAs. The allocation methodology was 

based primarily on the 2008 HERA allocations to HFAs and historical HFA issuance.

Support for both single-family and multi-family bonds: HFAs were able to request that a 

portion or all of their NIBP allocation be used to issue single or multi-family bonds. The amount 

of multi-family bond issuance was subject to a cap at the program level. 

Protecting Taxpayers: HFAs pay Fannie Mae, Freddie Mac, and Treasury an amount intended 

to cover both the cost of financing the newly issued bonds as well as a fee designed to cover risk 

posed by the HFA. Generally speaking, the interest rate on the bond after release from escrow 

was set to cover Treasury’s cost of financing (set at a market-based index rate) plus the 

additional fee designed to offset the credit risk to the taxpayer.

3.1.2 – New Issue Bond Program Budget and Performance Report and Plan

Description of Performance:

Treasury continues to monitor the housing markets as well as other indicators, which have an 

impact on the HFAs. After two one-year extensions, HFAs had a deadline of December 31, 

2012 to use NIBP funds.

3C – Temporary Credit and Liquidity Program

(No funding): 

The function of the TCLP is to help relieve financial strains for HFAs. The TCLP provides 

HFAs with temporary credit and liquidity facilities to preserve the viability of the HFA 

infrastructure. This allows HFAs to continue their Congressionally supported role in helping 

provide affordable mortgage credit to low and moderate-income homebuyers, and other 

important activities in communities. 

Reducing costs of maintaining existing financing for HFAs: Through Fannie Mae and Freddie 

Mac, the TCLP provides replacement credit and liquidity facilities to HFAs that help reduce the 

costs of maintaining existing financing for the HFAs. Using HERA authority, Treasury 

purchased a participation interest in Fannie Mae and Freddie Mac temporary credit and liquidity 

facilities for the HFAs, and thereby Treasury backstops the replacement liquidity. 

Program sized to meet demand : HFAs submitted detailed program participation requests to 

Treasury for the TCLP. No allocation process was required because requests came in at a total 

below the program cap.

Protecting Taxpayers: The HFAs pay Fannie Mae, Freddie Mac, and Treasury a fee designed to 

cover risk posed by the HFA. Additionally the program extension required participating HFAs 

to submit a plan for Treasury’s approval that demonstrated how each HFA would reduce risk 

borne by the taxpayer under the program.

Temporary solution, with incentives for HFAs to quickly transition back to market financing: 

The fee for HFAs to use the TCLP increases over time to encourage the HFAs to transition to 

private market financing alternatives as quickly as possible. This process was accelerated by the 
GSEs - 11

required submission and approval of plans from the HFAs, which demonstrated how they will 

exit the program.

Terms designed to facilitate sustainable business models for housing agencies - The liquidity 

facilities under the TCLP program are only available for outstanding bonds.

3.1.3 – Temporary Credit and Liquidity Program Budget and Performance Report and 

Plan

Description of Performance:

Treasury continues to monitor the housing markets as well as other factors affecting HFAs. 

During FY 2012 and FY 2013, Treasury granted three-year extensions to the end of calendar 

year 2015 to six HFAs, which were conditioned on Treasury’s approval of plans to reduce 

balances of HFA bonds covered by TCLP during the extension period. Continued market 

surveillance and monitoring of participating HFAs will take place in FY 2015.