Congressional Justifications for 1998 Budget Estimates

Regulation of Federal National Mortgage Association
and Home Loan Mortgage Corporation

Under the Housing and Community Development Act of 1992 (P.L. 102-550), the Director of the Federal Housing Enterprise Oversight (OFHEO) is responsible for ensuring that Fannie Mae and Freddie Mac are adequately capitalized and operating safely. The Act authorizes the Director to collect annual assessments from the GSEs to provide for the Office's costs and expenses. OFHEO submits a seperate budget justification which is presented later in these justifications.

Except for safety and soundness matters and certain duties and functions of the Director that are not subject to the Secretary's review and approval, the Secretary, under the Act, has general regulatory power over Fannie Mae and Freddie Mac and is directed to make rules and regulations to ensure that the purposes of the Fannie Mae Charter Act and the Freddie Mac Act are accomplished and that the Secretary's authorities in the Act are carried out. Under the Act, the Secretary also has increased regulatory responsibilities including: establishing, monitoring, and enforcing housing goals for the GSEs' purchase of mortgages on housing for low- and moderate-income families, housing located in central cities, rural areas, and other underserved areas, and housing meeting the needs of and affordable to low-income families in low-income areas and very low-income families; approving new programs; establishing Fair Housing requirements; reporting annually to Congress, including reports on the housing goals; and reviewing and approving certain determinations, actions, and functions of the Director. The expenses for these regulatory functions come from the Salaries and Expenses, HUD account.

Note: The Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) are Government-Sponsored Enterprises (GSEs), operating under Congressional charters, and owned by private shareholders. The status of the two corporations as GSEs provides them with special privileges in return for accomplishing certain public purposes prescribed by their charters, and it subjects them to regulation by the Department of Housing and Urban Development. The Treasury is authorized to make up to $2.25 billion of loans to Fannie Mae and Freddie Mac. The loan authority will be used only in emergency situations.