GSE-1 

Housing Government Sponsored Enterprise Programs

Mission Statement

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

same time protecting the taxpayer, Treasury has implemented five programs with respect 

to two Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, as well 

as 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 credit facility for all three entities. 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 TCLP and the NIBP 

comprise the Housing Finance Agencies Initiative (“HFA Initiative”).

Program Summary by Budget Activity 

(Dollars in Thousands)

FY 2010 FY 2011 FY 2012 Change FY10 to FY12

Housing GSEs Enacted Estimated Estimated $ Change % Change

Preferred Stock Purchase Agreements $52,600,000 $47,500,000 $28,700,000 ($18,800,000) -39.58%

GSE MBS Purchase Program $29,877,874 $0 $0 $0 0%

GSE Credit Facility $0 $0 $0 $0 0%

New Issue Bond Purchase Program $15,308,598 $0 $0 $0 0%

Temporary Credit and Liquidity Program $8,209,840 $0 $0 $0 0%

FY 2012 Priorities

• To provide stability to financial markets.

• To prevent disruptions to the availability of mortgage credit to 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. 
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Table of Contents

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

1A-Description of Bureau Vision and Priorities............................................................. 3

1B – Program History and Future Outlook..................................................................... 4

Section 2 – Budget Adjustments and Appropriation Language............................. 13

2.1 Summary of Appropriation Highlights................................................................... 13

2.2 Financing Accounts- Non-Budgetary Summary..................................................... 13

2B – Appropriations Language and Explanation of Changes....................................... 14

2C – Legislative Proposals ........................................................................................... 14

2D – Probability of Repayment .................................................................................... 14

Section 3 – Budget and Performance Plan ............................................................... 15

3.1 – Budget by Strategic Outcome .............................................................................. 16

3A – Preferred Stock Purchase Agreements................................................................ 16

3.2.1 – Preferred Stock Purchase Agreement Budget and Performance Plan .............. 16

3B – GSE MBS Purchase Program.............................................................................. 16

3.2.2 – GSE MBS Purchase Program Budget and Performance Plan .......................... 17

3C – GSE Credit Facility............................................................................................. 18

3.2.3 – GSE Credit Facility Budget and Performance Plan.......................................... 18

3D – New Issue Bond Program .................................................................................... 18

3.2.4 – New Issue Bond Program Budget and Performance Plan ................................ 19

3E – Temporary Credit and Liquidity Program............................................................ 19

3.2.5 – Temporary Credit and Liquidity Program Budget and Performance Plan ....... 20
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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 have purchased securities issued or guaranteed by Fannie Mae and 

Freddie Mac in part because ambiguities in their Congressional charters created a 

perception of government backing. These ambiguities fostered enormous growth in the 

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

holdings posed a systemic risk to global financial markets. 

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

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

remain viable entities, which, in turn, leads to increased mortgage affordability. This 

commitment also eliminates any 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 provide stability to the GSE securities market.

• To maintain 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, was another element of its comprehensive 

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

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

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

the program was based on developments in the capital markets and housing markets. 

Given that Treasury can hold these securities to maturity, the spreads between Treasury’s

cost of funds and GSE MBS yield should result in a positive return to the taxpayer.

Priorities:

• To prevent disruptions to the availability of mortgage credit to American 

homebuyers.

• To mitigate pressures in mortgage markets.

• To provide stability to the mortgage market.
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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.

Vision: The funding was to be provided directly by Treasury from its general fund held at 

the Federal Reserve Bank of New York in exchange for eligible collateral which was

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 were to be accepted with 

appropriate collateral margins as determined by Treasury. Loans were to be for shortterm durations and would in general be expected to be for less than one month, but no 

shorter than one week. The fee, if the GSE Credit Facility was used, was to be LIBOR + 

50 basis points.

Priorities:

• To maintain credit availability to the GSEs.

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

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 helping persons and families of low 

or moderate income attain affordable housing. State and local HFAs operate in all 50 

states and many cities across the country. HFAs also provide refinancing and 

modification opportunities to homeowners at risk of foreclosure, to enable them to 

convert to more affordable and sustainable mortgages. In addition, HFAs serve other 

functions related to providing affordable housing resources, such as providing 

homeownership education and allocating low income housing tax credits. 

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

homeownership for working families across the country. State and local HFAs have 

experienced a number of challenges in the course of the housing downturn, including a 

lack of liquidity support for existing variable rate bonds, credit and cash flow concerns 

stemming from losses on mortgages and downgrades of re-insurance providers, and an 

inability to issue new bonds to fund single-family and multi-family loans. Historically, 

HFAs have funded their activities by issuing tax-exempt mortgage revenue bonds 

(MRBs), 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 and the widening of spreads in the 

tax-exempt market, HFAs have experienced challenges in issuing new bonds to fund new 

mortgage lending. They have also faced difficulties in renewing required liquidity 

facilities on non-punitive terms. 
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Overall, market conditions have undermined the ability of the HFAs to maintain their 

important, Congressionally supported role in the housing market, providing access to

affordable mortgage credit for low and moderate-income Americans. 

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

the same time protecting the taxpayer, Treasury has implemented two programs as part of 

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

and the Temporary Credit and Liquidity Program (TCLP). 

New Issue Bond Program

The New Issue Bond Program (NIBP) provides temporary financing for HFAs to issue 

new housing bonds. Treasury purchased securities of Fannie Mae and Freddie Mac 

backed housing bonds and escrowed funds that may be converted to housing bonds prior 

to the end of calendar year 2011. This temporarily allows the HFAs to issue an amount of 

new housing bonds equal to what they would ordinarily have been able to issue with the 

allocations provided them by Congress but are unable to issue given the challenges in 

housing and related markets. The program is sized to support several hundred thousand 

new mortgages to first time homebuyers, as well as refinancing opportunities to put atrisk, but responsible and performing, borrowers into more sustainable mortgages. The 

NIBP also supports development of tens of thousands of new rental housing units for 

working families. 

Vision: The NIBP provided 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 until the market recovered, the NIBP enables HFAs to keep their lending 

programs active while they adapted to changing market conditions. The program 

supports the availability of mortgage credit and affordable rental properties for low and 

moderate income Americans. Facilitating supply and demand in the housing markets

helps to stabilize the housing markets, thereby reducing losses to the Housing GSEs.

Priorities: 

• To provide stability to the housing market.

• To maintain the viability of the GSEs and state and local Housing Finance Agencies.

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

income Americans.
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Temporary Credit and Liquidity Program

Fannie Mae and Freddie Mac administer a Temporary Credit and Liquidity Program 

(TCLP) for HFAs to help relieve financial strains and enable them to continue to serve 

their important role in providing housing resources to working families. Treasury

purchased a participation interest in the Temporary Credit and Liquidity Facilities 

(TCLFs) provided to HFAs under the program, providing a credit and liquidity backstop. 

These temporary credit and liquidity facilities will help the HFAs maintain their financial 

health and preserve the viability of the HFA infrastructure so that that HFAs can continue 

their Congressionally supported role in helping provide affordable mortgage credit to low 

and moderate income Americans, as well as continue their other important activities in 

communities. 

Vision: The TCLP provides stability to financial markets and prevent disruptions in 

mortgage finance availability by helping HFAs relieve financial strains and enabling 

them to continue to serve their important role in providing housing resources to working 

families. The TCLP supports the HFAs through the downturn and gives them time to 

develop and implement more sustainable financing structures that preserve their critical 

role in extending mortgage credit to low- and moderate-income Americans.

Priorities:

• To provide stability to the housing market.

• To maintain the viability of the GSEs and state and local Housing Finance Agencies.

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

income Americans.

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 

challenges experienced by Fannie Mae and Freddie Mac, the FHLBs’ borrowing costs 
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were also affected, which had repercussions on the availability of mortgage credit in the 

overall economy.

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

and Freddie Mac in part because ambiguities in their Congressional charters created a 

perception of government backing, which fostered enormous growth by these two 

housing GSEs. 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 first 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 order to further provide stability to financial markets, prevent disruptions in mortgage 

finance availability, and protect the taxpayers, Treasury exercised its authority under the 

Act in December 2009 by amending the PSPAs in three ways. First, Treasury replaced

the existing fixed $200 billion cap on Treasury advances with a formulaic cap for the 

next two years that will automatically adjust upwards quarterly by the cumulative amount 

of any losses realized by either GSE and downward by the cumulative amount of any 

gains, but not below $200 billion, and will become fixed at the end of two years. Second, 

Treasury adjusted the retained portfolio runoff requirements such that any reduction will 

be measured from the $900 billion total permitted portfolio size for each GSE and the 

target date for the first 10% reduction was postponed to December 31, 2010. Third, 

Treasury delayed the periodic commitment fee setting process to December 10, 2010.

The PSPAs provide for purchases in senior preferred stock from each GSE to help ensure 

that they each maintain a positive net worth. The three changes to the PSPAs described 

above will further provide market stability by providing additional confidence to GSE 

debt holders and will further prevent disruptions in mortgage availability by providing 

additional confidence to investors in GSE mortgage-backed securities.

In designing these three changes to the PSPAs, 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 continue to 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. The PSPAs also continue to 

protect the taxpayer by: (i) prohibiting Fannie Mae and Freddie Mac from issuing any 

additional subordinated debt; and (ii) restricting Fannie Mae and Freddie Mac from 

increasing the aggregate amount of their indebtedness to more than 120% of the amount 

of their permitted mortgage portfolio size as of December 31, 2010. In addition, the 

terms of the PSPAs require Fannie Mae and Freddie Mac to remit to Treasury the net 

proceeds from the issuance of any equity which is to be applied to redeem amounts 

outstanding under the liquidation preference (and which shall be applied first against any 

accrued and unpaid dividends).
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Limits on maturity or disposition of obligations or securities – In considering the 

appropriate limits on the duration of the PSPAs, it was determined that, in order to 

facilitate market stability, the PSPAs should continue until the earlier of reaching a 

formulaic cap that will automatically adjust upwards quarterly by the cumulative amount 

of any losses realized by either GSE and downward by the cumulative amount of any 

gains, but not below $200 billion or until all liabilities of Fannie Mae and Freddie Mac 

have been satisfied. In addition, beginning in 2011 the Treasury will charge the GSEs a 

periodic commitment fee that is payable quarterly to compensate the taxpayers for the 

ongoing support provided to the GSEs under the terms of the PSPAs. 

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 structure of the PSPAs, with their liquidation preference over all other equity, 

including preferred equity, combined with the PSPAs’ restrictions on debt issuance, 

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 – Fannie Mae and Freddie Mac may emerge from conservatorship to resume 

independent operations, or they may emerge in some other form reflecting legislative 

changes to their congressional charters. Conservatorship preserves the status and claims 

of the preferred and common shareholders. The value of the warrants issued to the 

government under the terms of the PSPAs could potentially increase, thereby providing 

enhanced value to the taxpayers. Upon the government’s exercise of the warrants, the 

GSEs would be required under the terms of the PSPAs to apply the net cash proceeds to 

pay-down the liquidation preference of the senior preferred stock.

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 PSPAs 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. The 

PSPAs require that the Director of FHFA consult with the Treasury before entering into 

any new compensation arrangements or increasing amounts or benefits payable under 

existing compensation agreements with certain executive officers. 
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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 funding commitment limit of $100 billion each. These agreements were 

subsequently amended to have a funding commit limit of $200 billion each, and further 

amended in December, 2009, to replace the fixed-dollar-amount funding commitment 

limit with a formulaic limit that will automatically adjust upward quarterly by the amount 

of any cumulative reduction in net worth over the next three years. 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.

Program Outlook: Treasury estimates that it will make $47.5 billion in payments under 

its funding commitment in FY 2011 and $28.7 billion in FY 2012.

GSE MBS Purchase Program

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

its financial agents to act as asset managers 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 initially 

reported in the Monthly Treasury Statement but is now also published in a more detailed 

form on FinancialStability.gov.

Program Outlook: Treasury purchased nearly $29.9 billion under its authority for this 

program in FY 2010 which was the last fiscal year in which purchase authority was 

available. Treasury’s authority to purchase securities under the program expired on 

December 31, 2009.

GSE Credit Facility

Program History: This program would have provided liquidity if needed until 

December 31, 2009, but it was not been needed.

Program Outlook: Treasury did not use this program in FY 2011 as Treasury’s

authority to originate loans under the program expired on December 31, 2009.
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Housing Finance Agencies Initiative

The Housing and Economic Recovery Act of 2008 signed into law on July 30, 2008, 

included authority for the Secretary of the Treasury to purchase obligations of the 

Housing GSEs. These entities include: Fannie Mae, Freddie Mac, and the FHLBs. On 

October 19, 2009, Treasury announced the Housing Finance Agencies Initiative, 

including the New Issue Bond Program and the Temporary Credit and Liquidity 

Program.

In designing these two initiatives, specific steps were taken to protect the taxpayer. In 

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

below.

The need for preferences or priorities – The Housing GSEs are participating in the TCLP 

and NIBP based on an assessment by the Housing GSEs and the FHFA that these are 

commercially reasonable transactions for the Housing GSEs to undertake. Under both 

the TCLP and the NIBP, participating HFAs pay the Housing GSEs and Treasury a fee 

designed to credit cover risk posed by the HFA. In addition, both the TCLP and the 

NIBP are designed to maintain the health of the HFAs while still protecting the taxpayer. 

The fee for HFAs to use the TCLP increases over time. This increasing cost to the HFAs 

will encourage the HFAs to transition from the TCLP to private market financing 

alternatives as quickly as possible. Before the HFAs can use the NIBP to issue bonds 

purchased by the GSEs, they are required to sell to the private market an amount of 

shorter-term bonds in a ratio equal to 40 percent of aggregate bond proceeds, with the 

other 60 percent of bonds represented by the bonds purchased through NIBP. 

Limits on maturity or disposition of obligations or securities – The duration and 

maturities of the obligations undertaken by the Housing GSEs have been set in a manner 

that is consistent with commercially reasonable practices. Treasury can at any time, e.g., 

when the secondary market for HFA housing bonds recovers, instruct the issuing 

Housing GSE to dissolve any GSE security that Treasury has purchased, at which time 

the Housing GSE will deliver the underlying HFA housing bonds to Treasury’s designee 

for resale.

Housing GSEs’ plans for orderly resumption of private market funding or capital market 

access – Under conservatorship, Fannie Mae and Freddie Mac continue to operate as 

going concerns, and the issuance of the Senior Preferred Stock Purchase Agreement, and 

Treasury’s corresponding commitment of funding for the next two years so that each 

Housing GSE maintains a positive net worth, should continue to strengthen their ability 

to secure financing in the capital markets. The Housing GSEs and FHFA have assessed 

the NIBP and TCLP programs as being commercially reasonable, so the Housing GSEs 

will be executing these programs through commercially reasonable capital markets 

transactions. We don’t envision any negative impact on the Housing GSEs’ resumption 

of private market funding or capital market access from executing the HFA Initiative.

Probability of the Housing GSEs fulfilling the terms of their obligations - The pricing and 

fee structure of the TCLP and NIBP were designed to be commercially reasonable, and 
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allow the Housing GSEs to fully cover all costs of the programs. Therefore, it is 

expected that the Housing GSEs will be able to fulfill all of their obligations under the 

HFA Initiative. The HFA Initiative will be funded by fees paid by the HFAs to the 

Housing GSEs. 

Need to maintain the Housing GSEs’ status as private shareholder-owned companies –

Both the TCLP and NIBP have been entered into by the Housing GSEs with the approval 

of FHFA on commercially reasonable terms. Based on pricing and the fee schedule for 

both programs, the Housing GSEs expect a commercially reasonable return from 

participating in these programs. We don’t envision any negative impact to the Housing 

GSEs or shareholders from executing the HFA Initiative.

Restrictions on the use of corporation resources – Fannie Mae and Freddie Mac have 

already been made subject to executive compensation restrictions. The TCLP and NIBP 

do not place additional restrictions on the use of corporation resources.

New Issue Bond Program

Program History: During FY 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. The Housing GSEs are participating in the NIBP based on an 

assessment by the Housing GSEs and the FHFA that these are commercially reasonable 

transactions for the Housing GSEs to undertake. Under the terms of the NIBP, Treasury 

has purchased GSE securities backed by housing bonds issued by the state and local 

HFAs as well as some proceeds which are in escrow pending the issuance of additional 

HFA housing bonds. 

Program Outlook: Treasury purchased approximately $15.3 billion under its authority 

for this program in FY 2010. Treasury’s authority to enter additional purchase 

commitments under the program expired on December 31, 2009, however the funds 

remaining in escrow may continue to be used for the issuance of new housing bonds 

through December 31, 2011.
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Temporary Credit and Liquidity Program

Program History: During FY 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. The Housing GSEs are participating in the TCLP based on an 

assessment by the Housing GSEs and the FHFA that these are commercially reasonable 

transactions for the Housing GSEs to undertake. Under the terms of the TCLP, Treasury 

purchased participation interests in GSE liquidity facilities available for outstanding 

housing bonds issued by state and local HFAs. $8.2 billion has been allocated to state 

and local HFAs through the TCLP to use the credit and liquidity facilities.

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

will remain open in FY 2011 and FY 2012. However, this obligation will diminish over 

time as HFAs redeem the bonds in the program or transition to private market liquidity 

providers. Treasury’s authority to enter additional obligations under the program expired

on December 31, 2009.
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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)

Pref

Accounts

erred Stock and Program 

2010

Actual

2011

Estimate

2012

Estimate

Obligations:

 Preferred Stock Purchase Account

 HFA Initiative and GSE MBS Purchase 

 Program Account

Total Obligations

$52,600,000 

$21,000 

$52,821,000 

$47,500,000

 $27,920

$47,527,920

$28,700,000

$17,000

$28,717,000

Budget Resources:

 

 Preferred Stock Purchase Account $304,400,000 $251,800,000 $204,300,000

 HFA Initiative and GSE MBS Purchase Program Account $29,000 $27,920 $17,000

Total Budgetary Authority $304,429,000 $251,827,920 $204,317,000

Outlays:

 Preferred Stock Purchase Account

 HFA Initiative and GSE MBS Purchase 

 Program Account

Total Outlays

$52,600,000 

$29,000

$52,689,000 

$47,500,000

$27,920

$47,527,920

 

$28,700,000

 

 $17,000 

$28,717,000

 

 

 

2.2 Financing Accounts- Non-Budgetary Summary 

Financing Accounts – Non-Budgetary Financial Summary 

(dollars in thousands)

2010

Actual

2011

Estimate

2012

Estimate

GSE MBS Direct Loans:

 Obligations

 Collections

 Financing Authority(net)

 Financing Disbursements(net) 

$45,292,000

$48,602,000

$8,791,000

-$3,310,000

$5,336,000

$41,397,000

-$33,742,000

-$39,270,000

$6,512,000

$39,201,000

-$35,008,000

-$32,229,000

HFA Initiative: 

 Obligations

 Collections

 Financing Authority(net)

 Financing Disbursements(net) 

$23,739,000

$223,000

$24,684,000

$15,943,000

$225,000

$1,976,000

-$1,976,000

$1,373,000

$261,000

$3,097,000

-$2,836,000

-$2,836,000
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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.

2D – Probability of Repayment

At the end of December, 2009, Treasury closed on all GSE MBS, NIBP and TCLP 

transactions. All three programs had a negative subsidy estimate at the time of 

purchase/obligation meaning anticipated net receipts for the government is in excess of 

outlays. Subsequent re-estimates have led to a positive subsidy estimate for the NIBP. 

Such changes in the NIBP estimate were a result of cash flows on actual bond issuances 

being timed in a manner different from the timing originally modeled as well as the fact 

that the present value factors used to model Treasury’s cost of capital changed. Future

re-estimates pending the formulation of a disposition strategy may cause the subsidy to 

return to being negative. The subsidy estimates for the TCLP and MBS Purchase 

program, however, remain negative.
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Section 3 – Budget and Performance Plan

This table lists all FY 2012 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 2010 

Actual

FY 2011 

Estimate

FY 2012 

Estimate

% Change

FY11 to FY12

 Stabilizing Economy- PSPA $52,600,000 $47,500,000 $28,700,000 -39.58%

 Stabilizing Economy- MBS 0 0 0 0%

 Stabilizing Economy- Credit Facility 0 0 0 0%

 Stabilizing Economy- NIBP 0 0 0 0%

 Stabilizing Economy- TCLP 0 0 0 0%

 

3A – Preferred Stock Purchase Agreements (No funding): 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 confidence to holders of 

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

affordability. This commitment also eliminates any 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 percent of the common stock of each GSE on a 

fully-diluted basis at a nominal price. The senior preferred stock accrues dividends at 10 

percent per year. The rate will increase to 12 percent if, in any quarter, the dividends are 

not paid in cash, until all accrued dividends have been paid in cash.

Beginning March 31, 2011, the GSEs shall pay the Treasury on a quarterly basis a 

periodic commitment fee that will compensate the Treasury for the explicit support 
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provided by the agreement. The Secretary of the Treasury and the Conservator shall 

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:

PSPA program offices track metrics to assess Fannie Mae and Freddie Mac’s health and 

contribution to mortgage market stability. To assess the contribution of Fannie Mae and 

Freddie Mac to mortgage availability, the Housing GSE program tracks the percentage of 

agency MBS issuance of total MBS issuance and the dollar volume of mortgage 

purchases by the GSEs. During FY 2009, the majority of MBS were originated by the 

GSEs, contributing substantially to the stabilization of housing markets. To assess 

program management and ensure the stability of the GSEs, the program tracks the 

condition of the GSEs in coordination with the FHFA and makes PSPA disbursements as 

necessary. Increasing stability in the housing market has resulted in declining 

disbursements to the GSEs in recent quarters. Projected disbursements for FY 2011 and 

FY 2012 are $47.5 billion and $28.7 billion, respectively. 

3B – GSE MBS Purchase Program (No funding): The function of the GSE MBS 

Purchase Program was 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 purchased GSE MBS in the open 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 was subject to the discretion of the Secretary of the 

Treasury. The scale of the program was 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 should result in a positive return to

the Taxpayer.

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 purchases of GSE MBS were deemed as outlays, and the debt incurred to fund 

the purchases is subject to the statutory debt limit. However, Treasury is receiving an 

income producing asset in return for its invested funds. 

Treasury does not have the authority to purchase GSE MBS beyond December 31, 2009. 
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3.2.2 – GSE MBS Purchase Program Budget and Performance Plan

Description of Performance:

The MBS Purchase Program utilizes a broad range of market indicators in daily

operations to ensure funds support mortgage availability for both current and prospective 

homeowners and promote secondary market stability. The program also utilizes risk 

assessment techniques, including scenario analysis and cash flow forecasts, to ensure 

zero principal loss on outlays. Risk management practices will constitute the bulk of 

program operations in FY 2012, as no additional purchases beyond December 31, 2009 

are currently permitted under law.

3C – GSE Credit Facility (No funding): The function of the GSE Credit Facility was to

maintain 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 were eligible to borrow under 

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

Treasury did not use this program in FY 2010.

Funding was to 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 which was

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 were to be 

accepted with appropriate collateral margins as determined by Treasury.

Loans were to be for short-term durations and were in general expected to have been for 

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

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

The rate was to be set at the discretion of the Secretary of the Treasury with the objective 

of protecting the taxpayer, and was to be subject to change. All loans were to be

collateralized and collateral was limited to mortgage backed securities issued by Freddie 

Mac and Fannie Mae and advances made by the FHLBs. Loans were not to have been 

made with a maturity date beyond December 31, 2009.

3.2.3 – GSE Credit Facility Budget and Performance Plan

Description of Performance:

As the Credit Facility has been terminated, there are no related performance metrics for 

this program.
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3D – New Issue Bond Program (No funding): The function of the NIBP is to 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 until the market can 

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

to changing market conditions. The program will support the availability of mortgage 

credit and affordable rental properties for low and moderate income Americans. 

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

to Treasury’s financial agents. In order to haircut the NIBP requests to an acceptable 

level that could be recommended for adoption, a methodology was developed and applied 

to arrive at final allocation recommendations under the program for state and local 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 is subject to a cap at the program level. Two types 

of multi-family bonds are allowed under the program: bonds that finance single-projects 

and bonds where proceeds can be used to finance multiple-projects that are approved or 

guaranteed by Fannie Mae, Freddie Mac, or the Federal Housing Administration. Both 

single-family and multi-family bond issuance are also subject to additional requirements. 

Protecting taxpayers. HFAs pay the GSEs 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 newly issued HFA bonds will 

be set to equal a short-term Treasury interest rate for the period in which the proceeds are 

held in reserve before being drawn down by the HFAs to originate mortgages. Within 60

days of the proceeds being drawn down, the interest rate on the bond will increase to 

cover Treasury’s cost of financing (set at the 10-year Treasury rate) plus the additional 

fee designed to offset risk to the taxpayer. 

Required sale of bonds to private market to impose market discipline and further 

leverage investment. The proceeds from issued bonds were placed in escrow until used 

by the HFAs to fund new mortgages in 2010 or 2011. Before the HFAs can use the 

proceeds, they are required to sell to the private market an amount of shorter-term bonds 

in a ratio equal to 40 percent of aggregate bond proceeds, with the other 60 percent of 

bonds represented by the bonds purchased through NIBP. This means that our temporary 

investment will be leveraged to create even more low-rate mortgages for working 

families, while at the same time using market discipline to help mitigate risk to the 

taxpayer.
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3.2.4 – New Issue Bond Program Budget and Performance Plan

Description of Performance:

Treasury and its financial agents continue to monitor the housing markets as well as other 

indicators which have an impact on the HFAs. Through monitoring these indicators, as 

well as the performance of the HFAs, Treasury will assess the relative health of the HFAs 

in FY 2012. No additional assistance beyond December 31, 2009 is currently permitted 

under law.

3E – Temporary Credit and Liquidity Program (No funding): The function of the 

TCLP is to help relieve current financial strains for HFAs and enable them to continue to 

serve their important role in providing housing resources to working families. The TCLP 

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

the HFA infrastructure so that HFAs can continue their Congressionally supported role in 

helping provide affordable mortgage credit to low and moderate income Americans, as 

well as continue their 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 

will help reduce the costs of maintaining existing financing for the HFAs. Treasury 

backstops the replacement liquidity by purchasing a participation interest in the GSE 

temporary credit and liquidity facilities for the HFAs using HERA authority. 

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

to Treasury’s financial agents for the Temporary Credit and Liquidity Program (TCLP). 

No allocation process was required because requests came in at a total below the program 

cap.

Protecting Taxpayers. The HFAs pay the GSEs and Treasury a fee designed to cover risk 

posed by the HFA. Other specific features of the program are also designed to maintain 

the health of the HFAs while still protecting the taxpayer, such as limiting the 

requirement for accelerated amortization of principal for bonds that end up being put to 

the GSEs 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. This increasing cost to 

the HFAs encourages the HFAs to transition from the TCLF to private market financing 

alternatives as quickly as possible. 

Terms designed to facilitate sustainable business models for housing agencies. The 

liquidity facilities under the TCLP program are only available for outstanding bonds.
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3.2.5 – Temporary Credit and Liquidity Program Budget and Performance Plan

Description of Performance:

Treasury and its financial agents continue to monitor the housing markets as well as other 

indicators which have an impact on the HFAs. Through monitoring these indicators, as 

well as the performance of the HFAs, Treasury will assess the relative health of the HFAs 

in FY 2012. No additional assistance beyond December 31, 2009 is currently permitted 

under law.