Housing Government Sponsored Enterprise Programs 

Mission Statement 

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

the same time protecting the taxpayer, Treasury has implemented three programs with 

respect to the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, 

and the Federal Home Loan Banks (FHLBs). These programs include Preferred Stock 

Purchase Agreements (PSPAs) with Fannie Mae and Freddie Mac, a Mortgage-Backed 

Securities (MBS) Purchase Program limited to such securities issued by Fannie Mae and 

Freddie Mac, and a Treasury credit facility for all three entities. 

Program Summary by Budget Activity 

(Dollars in Thousands) 

 FY 2008 FY 2009 FY 2010 

Housing Government 

Sponsored Enterprise 

Programs Activity Actual Estimated Estimated $ Change % Change 

Preferred Stock Purchase 

Agreements Obligations $0 $105,900,000 $41,293,000 ($64,607,000) -61.01% 

GSE MBS Purchase Program 

Securities 

Purchased $5,000,000 $249,000,000 $60,000,000 ($189,000,000) -75.90% 

GSE Credit Facility 

Loan 

Levels $0 $0 $0 $0 0%

FY 2010 Priorities 

• To promote stability in financial markets.

• To improve the availability of mortgage credit to American homebuyers. 

• To ensure investor confidence in the GSEs. 
Table of Contents 

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

1A-Description of Bureau Vision and Priorities........................................................ 1 

1B – Program History and Future Outlook ............................................................... 2 

Section 2 – Budget Adjustments and Appropriation Language................................... 6

2.1 Summary of Appropriation Highlights................................................................. 6 

2.2 Summary of Mandatory Receipts ......................................................................... 6 

2.3 Financing Accounts- Non-Budgetary Summary.................................................. 7 

2B – Appropriations Language and Explanation of Changes.................................. 7 

2C – Legislative Proposals............................................................................................ 7 

Section 3 – Budget and Performance Plan ..................................................................... 8

3.1 – Budget by Strategic Outcome ............................................................................. 8 

3A – Preferred Stock Purchase Agreements............................................................. 8 

3.2.1 – Preferred Stock Purchase Agreement Budget and Performance Plan........ 9 

3B – GSE MBS Purchase Program ............................................................................ 9 

3.2.2 – GSE MBS Purchase Program Budget and Performance Plan..................... 9 

3C – GSE Credit Facility........................................................................................... 10 

3.2.3 – GSE Credit Facility Budget and Performance Plan.................................... 10 
GSE – 1

Section 1 – Purpose

1A-Description of Bureau Vision and Priorities 

Preferred Stock Purchase Agreements 

The PSPAs were created to instill confidence in investors that Fannie Mae and Freddie 

Mac would remain viable entities critical to the functioning of the housing and mortgage 

markets. Investors purchased securities issued or guaranteed by Fannie Mae and Freddie 

Mac in part because they perceived that the GSEs were implicitly backed by the U.S. 

Government. This perception may have contributed to the enormous growth in the 

obligations issued or guaranteed by these two housing GSEs, and the breadth of these 

holdings posed a systemic risk to global financial markets. The U.S. government entered 

into the PSPAs with Fannie Mae and Freddie Mac as part of its efforts to avert and 

ultimately address the systemic risk now posed by the scale and breadth of the holdings 

of GSE debt and mortgage backed securities.

Vision: The focus of the PSPAs is to enhance market stability by providing additional 

security to holders of Fannie Mae and Freddie Mac securities that the GSEs will remain 

viable entities, leading to continued purchases of their debt and increased mortgage 

affordability. This commitment also significantly diminishes the potential for mandatory 

triggering of receivership. 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 a priority for the Department of the Treasury. In this regard, 

Treasury has identified the following priorities for mission success: 

• To promote stability of the GSE securities market. 

• To ensure the viability of the GSEs. 

GSE MBS Purchase Program 

The GSE MBS Purchase Program was created to help support the availability of 

mortgage credit by temporarily providing additional capital to the mortgage market. 

Vision: Treasury’s investment in GSE MBS, with the size and timing subject to the 

discretion of the Secretary of the Treasury, is another element of its comprehensive plan 

to address challenges in the housing markets. By purchasing these credit-guaranteed 

securities, Treasury seeks to broaden access to mortgage funding for current and 

prospective homeowners as well as to promote market stability. The scale of the program 

will be based on developments in the capital markets and housing markets. Given that 

Treasury can hold these securities to maturity, the spreads between Treasury issuances 

and GSE MBS indicate that there is little likelihood to expect taxpayer losses from this 

program, and, in fact, the program could produce gains. 
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Priorities: 

• To improve the availability of mortgage credit to American homebuyers 

• To mitigate pressures in mortgage markets 

• To promote stability of the mortgage market 

GSE Credit Facility 

The GSE Credit Facility was created to ensure credit availability to Fannie Mae, Freddie 

Mac, and the FHLBs by providing secured funding on an as-needed basis under terms 

and conditions established by the Treasury Secretary. Treasury does not expect to use this 

program in FY 2010. 

Vision: Any loans issued to the GSEs would be provided directly by Treasury from its 

general fund held at the Federal Reserve Bank of New York in exchange for eligible 

collateral, limited to guaranteed MBS issued by Fannie Mae and Freddie Mac as well as 

advances made by the FHLBs. All such assets pledged against loans would be accepted 

with appropriate collateral margins as determined by Treasury. Loans would be for shortterm durations and would in general be expected to have a maturity of less than one 

month, but no shorter than one week. The established interest rate for any loans issued 

through the credit facility is LIBOR + 50bp. 

Priorities: 

• To ensure credit availability to the GSEs. 

• To instill confidence in investors that these entities can finance themselves. 

1B – Program History and Future Outlook 

Section 1117 of the Housing and Economic Recovery Act of 2008 (Act) authorizes 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 as the Treasury 

may determine and in such 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 the Act was necessary to provide stability to the financial 

markets, prevent disruptions in the availability of mortgage finance, and protect 

taxpayers. 

Prior to Treasury’s exercise of authority, the overall conditions in the mortgage and 

housing markets were challenging for many market participants. Both Fannie Mae and 

Freddie Mac were exposed to these markets through their guarantees of mortgage backed 

securities and mortgage investments in their portfolios. As the assets supporting Fannie 

Mae’s and Freddie Mac’s guarantee and investment portfolios deteriorated, the costs of 

raising additional capital and funding themselves had increased, and both companies had 

experienced challenges in raising capital under these conditions. In addition to the 
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challenges experienced by Fannie Mae and Freddie Mac, the FHLBs’ borrowing costs 

were also affected, which had repercussions on the availability of mortgage credit in the 

overall economy. 

As noted above, investors purchased securities issued or guaranteed by Fannie Mae and 

Freddie Mac in part because they perceived that the GSEs were implicitly backed by the 

U.S. Government. Fannie Mae and Freddie Mac were so large and so interwoven in the 

U.S. financial system that a failure of either of them would have caused significant 

turmoil in U.S. financial markets and financial markets around the globe. Thus, Treasury 

exercised its purchase authority under this Act, and created the three programs described 

above to avoid the negative impact that the failure of Fannie Mae and Freddie Mac (and 

the diminished role of the FHLBs) would have on financial markets and the U.S. 

economy. 

In designing these three programs, specific steps were taken to protect the taxpayer. In 

particular, consideration was given to the six factors set forth in the Act. 

The need for preferences or priorities – The PSPAs protect the taxpayer by providing the 

Treasury with Senior Preferred Stock that has a liquidation preference over all other 

classes of equity, including existing preferred stock. Beginning in 2010, Treasury will 

have the ability to charge a periodic commitment fee that will be payable quarterly to 

compensate the taxpayers for the ongoing support provided to Fannie Mae and Freddie 

Mac under the terms of the PSPAs. The PSPAs also protect the taxpayer by limiting the 

amount of debt obligations and setting forth repayment requirements. . 

Limits on maturity or disposition of obligations or securities – Any loans made under the 

GSE Credit Facility will have a short-term duration and will be fully collateralized. The 

eligible collateral for loans made to the enterprises will generally be limited to enterprise 

MBS collateral. There will be adequate haircuts on the collateral to provide additional 

protection to the taxpayer as well as discretion to change if necessary. In considering the 

appropriate limits on the duration of the PSPAs, to facilitate market stability the PSPAs 

continue until the earlier of the cap being reached or until all liabilities of Fannie Mae and 

Freddie Mac have been satisfied. Under the GSE MBS Purchase Program, no taxpayer 

losses are expected given the spread between Treasury issuances and purchased MBS, 

and Treasury’s ability to hold MBS purchases to maturity. 

Enterprise plans for orderly resumption of private market funding or capital market 

access – Under conservatorship, the PSPAs allow for Fannie Mae and Freddie Mac to 

continue operating as going concerns by maintaining a positive net worth in each 

company, which allows for continued access to debt markets and preserves potential 

future capital market access. 

Probability of the Enterprises and the FHLBs fulfilling the terms of their obligations – 

The terms of the GSE Credit Facility with regard to the short-term duration, eligible 

collateral, and haircuts make it likely that the regulated entities will be able to fulfill their 

obligations. With regard to the PSPAs, the terms of the Senior Preferred Stock with its 
GSE – 4

liquidation preference over all other equity, including preferred equity, enhance the 

probability of both Fannie Mae and Freddie Mac ultimately repaying amounts owed. 

Need to maintain the Enterprises’ and the FHLBs’ status as private shareholder-owned 

companies – While the PSPAs provide Treasury with various forms of compensation 

(e.g., initial grant of preferred stock and warrants), Fannie Mae and Freddie Mac remain 

as private shareholder-owned companies. Fannie Mae and Freddie Mac may emerge 

from conservatorship to resume independent operations, or they may emerge in some 

other form determined by Congress. Conservatorship preserves the status and claims of 

the preferred and common shareholders. Moreover, the terms of the collateralized short 

term loans made under the GSE Credit Facility to the FHLBs are consistent with the need 

to maintain their status as private shareholder-owned companies. 

Restrictions on the use of corporation resources – The terms of the PSPAs prohibit 

Fannie Mae and Freddie Mac from declaring any dividends on outstanding preferred or 

common stock until the Senior Preferred Stock has been fully redeemed. The Purchase 

Agreements also prohibit the redemption of any outstanding preferred or common stock 

without the prior consent of the Treasury until the Senior Preferred Stock has been fully 

redeemed. In addition, the PSPAs have procedures in place to address executive 

compensation. 

Preferred Stock Purchase Agreements 

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

agreements with Fannie Mae and Freddie Mac. The agreements are indefinite in duration 

and have a capacity of $100 billion each. 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% 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. 

Program Outlook: Treasury will amend the PSPAs to $200 billion each from their 

original levels of $100 billion each. Treasury estimates that it will make $105.9 billion in 

payments under its funding commitment in FY 2009 and $41.3 billion in FY 2010. 

GSE MBS Purchase Program 

Program History: During September 2008, Treasury designated private sector firms to 

act as its financial agents and custodian. Treasury began to fund the GSE MBS purchase 

program in September 2008, and the first purchases were made by Treasury’s agents in 

the third week of September 2008. Program activity was reported in the Monthly 

Treasury Statement. \ 

Program Outlook: Treasury estimates that it will make $249 billion in purchases under 

its authority for this program in FY 2009 and $60 billion in FY 2010. 
GSE – 5

GSE Credit Facility 

Program History: This program will provide liquidity if needed until December 31, 

2009, but it has not been needed. 

Program Outlook: Treasury does not expect to use this program in FY 2009 or FY 

2010. 
GSE – 6

Section 2 – Budget Adjustments and Appropriation Language 

2.1 Summary of Appropriation Highlights 

Total Housing GSE Assistance Program 

Summary of Appropriation Highlights 

(dollars in thousands) 

2009 

Preferred Stock and Program 

Accounts 

2008 

Actual Budget 

Estimate 

Current 

Estimate 

2010 

Estimate 

Increase (+) 

Decrease (-) 

Obligations: 

 Preferred Stock Purchase Account 

 GSE MBS Purchase Program Account 

Total Obligations 

$0 

$0 

 $0 

$0 

$0 

$0 

$105,900,000 

$50,000 

$105,950,000 

$41,293,000 

 $13,000 

$41,306,000 

-$64,607,000 

-$37,000 

-$64,644,000 

Budget Authority: 

 Preferred Stock Purchase Account 

 GSE MBS Purchase Program Account 

Total Budgetary Authority 

$200,000,000 

 $0 

 $200,000,000

 $0

 $0

 $0

$200,000,000

 $50,000

$200,050,000

 $0 

 $13,000 

 $13,000 

-$200,000,000

 -$37,000 

 -$200,037,000 

Outlays: 

 Preferred Stock Purchase Account 

 GSE MBS Purchase Program Account 

Total Outlays 

$0 

$0 

$0 

$0 

$0 

$0 

$105,900,000 

$50,000 

$105,950,000

$41,293,000 

$13,000 

$41,306,000 

-$64,607,000 

-$37,000 

-$64,644,000 

2.2 Summary of Mandatory Receipts 

Summary of Mandatory Receipts 

(dollars in thousands) 

2009 

Preferred Stock Account 

2008 

Actual Budget 

Estimate 

Current 

Estimate 

2010 

Estimate 

Increase (+) 

Decrease (-) 

Mandatory Receipts: 

 Preferred Stock Dividend Receipt Account 

 

Total Receipts 

$0 

$0 

$0 

$0 

$4,421,000 

$4,421,000 

$6,680,000 

$6,680,000 

$2,259,000 

$2,259,000 
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2.3 Financing Accounts- Non-Budgetary Summary 

Financing Accounts – Non-Budgetary Financial Summary 

(dollars in thousands) 

2009 

2008 

Actual

Budget 

Estimate

Current 

Estimate 

2010 

Estimate 

Increase (+) 

Decrease (-) 

 GSE MBS Direct Loans: 

 Obligations 

 Collections 

 Financing Authority (net) 

 Financing Disbursements (net) 

$5,415,000 

$335,000 

$5,415,000 

$5,074,000

$0 

$0 

$0 

$0

$266,925,000

$16,313,000

$250,639,000

$250,639,000

$75,414,000 

$67,606,000 

$7,808,000 

$7,808,000 

-$191,511,000

$51,293,000

-$242,831,000

-$242,831,000

2B – Appropriations Language and Explanation of Changes 

The Housing Government Sponsored Enterprise 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. 
GSE – 8

Section 3 – Budget and Performance Plan

This table lists all FY 2010 resources by strategic goal, objective and outcome outlined in 

the FY 2007-2012 Treasury Department Strategic Plan. The Treasury Strategic Plan is a 

corporate level plan for the Department that provides a description of what the agency 

intends to accomplish over the next five years. 

For detailed information about the FY 2007-2012 Treasury Strategic Plan, please go to: 

http://www.treasury.gov/offices/management/budget/strategic_plan.shtml

3.1 – Budget by Strategic Outcome 

Dollars in Thousands 

TREASURY Strategic Outcome FY 2009 FY 2010 Percent

Estimated Estimated Change

AMOUNT AMOUNT AMOUNT 

 Stabilizing Economy- PSPA 105,900,000 $41,293,000 -61.01% 

 Stabilizing Economy- MBS 249,000,000 60,000,000 -75.90% 

 Stabilizing Economy- Credit Facility 0 0 0% 

3A – Preferred Stock Purchase Agreements ($41,293,000,000 in obligations): The 

function of the PSPAs is to instill confidence in investors that Fannie Mae and Freddie 

Mac will remain viable entities critical to the functioning of the housing and mortgage 

markets. Treasury entered into a PSPA with each GSE to ensure that each enterprise 

maintains a positive net worth. 

This measure enhances market stability by providing additional security to holders of 

Fannie Mae and Freddie Mac securities, which, in turn, leads to increased mortgage 

affordability by providing additional confidence to investors in GSE mortgage-backed 

securities. This commitment also significantly diminishes the potential for mandatory 

triggering of receivership. To this end, the PSPAs are an effective means of averting 

systemic risk while at the same time protecting the taxpayer. They are more efficient 

than a one-time equity injection, in that Treasury will use them only as needed and on 

terms that the Treasury deems appropriate. 

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

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

stock of each GSE representing 79.9% of the common stock of each GSE on a fullydiluted basis at a nominal price. The senior preferred stock accrues dividends at 10% per 

year. The rate will increase to 12% if, in any quarter, the dividends are not paid in cash, 

until all accrued dividends have been paid in cash. 

Beginning March 31, 2010, the GSEs shall pay the Treasury on a quarterly basis a 

periodic commitment fee that will compensate the Treasury for the explicit support 

provided by the agreement. The Secretary of the Treasury and the Conservator shall 
GSE – 9

determine the periodic commitment fee in consultations with the Chairman of the Federal 

Reserve. This fee may be paid in cash or may be added to the senior preferred stock. 

3.2.1 – Preferred Stock Purchase Agreement Budget and Performance Plan 

Description of Performance: 

Performance metrics are currently in development for the Housing Government 

Sponsored Enterprise Programs. Finalization of program metrics is expected by the end 

of the third quarter of FY 2009. 

3B – GSE MBS Purchase Program ($60,000,000,000 in purchases): The function of 

the GSE MBS Purchase Program is to help improve the availability of mortgage credit to 

American homebuyers and mitigate pressures on mortgage rates. To promote the 

stability of the mortgage market, Treasury has purchased GSE MBS in the secondary 

market. By purchasing these guaranteed securities, Treasury sought to broaden access to 

mortgage funding for current and prospective homeowners as well as to promote market 

stability. 

The size and timing of this program is subject to the discretion of the Secretary of the 

Treasury. The scale of the program is based on developments in the capital markets and 

housing markets. Given that Treasury can hold these securities to maturity, the spreads 

between Treasury issuances and GSE MBS indicate that there is little likelihood to expect 

taxpayer losses from this program, and, in fact, it could produce gains. 

Treasury has designated independent asset managers as financial agents to undertake the 

purchase and management of portfolio of GSE MBS on behalf of Treasury. The 

portfolios are managed with clear investment guidelines and investment objectives. The 

primary objectives of this portfolio are to promote market stability, ensure mortgage 

availability, and protect the taxpayer. 

Treasury financing of purchases of GSE MBS are deemed as outlays and are subject to 

the statutory debt limit. However, Treasury is receiving an income producing asset in 

return for its invested funds. 

Treasury's authority to purchase GSE MBS expires on December 31, 2009. 

3.2.2 – GSE MBS Purchase Program Budget and Performance Plan 

 

Description of Performance: 

Performance metrics are currently in development for Housing Government Sponsored 

Enterprise Programs. Finalization of program metrics is expected by the end of the third 

quarter of FY 2009. 
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3C – GSE Credit Facility (No funding): The function of the GSE Credit Facility is to 

ensure credit availability to the housing GSEs by providing secured funding on an as 

needed basis under terms and conditions established by the Secretary of the Treasury to 

protect taxpayers. Fannie Mae, Freddie Mac, and FHLBs are eligible to borrow under 

this program if needed. This facility offers liquidity if needed until December 31, 2009. 

Treasury does not expect to use this program in FY 2010. 

Funding for any loans would be provided directly by Treasury from its general fund held 

at the Federal Reserve Bank of New York in exchange for eligible collateral from the 

GSEs, limited to guaranteed mortgage backed securities issued by Freddie Mac and 

Fannie Mae as well as advances made by the FHLBs. All such assets pledged against 

loans would be accepted with appropriate collateral margins as determined by Treasury. 

Loans would be for short-term durations and would in general be expected to be for less 

than one month but no shorter than one week. The rate on a loan request ordinarily 

would be based on the daily LIBOR fix for a similar term of the loan plus 50 basis points. 

The rate is set at the discretion of the Secretary of the Treasury with the objective of 

protecting the taxpayer, and is subject to change. Loans will not be made with a maturity 

date beyond December 31, 2009. 

3.2.3 – GSE Credit Facility Budget and Performance Plan 

Description of Performance: 

Performance metrics are currently in development for Housing Government Sponsored 

Enterprise Programs. Finalization of program metrics is expected by the end of the third 

quarter of FY 2009.