The Housing and Economic Recovery Act (HERA) created the Federal Housing Finance Agency (FHFA) and gave the U.S. Treasury temporary authority to support Fannie Mae and Freddie Mac. This set up the legal tools that would soon be used to stabilize the two housing government-sponsored enterprises (GSEs) as mortgage losses mounted.
FHFA placed Fannie Mae and Freddie Mac into conservatorship, a legal status where the regulator takes control to stabilize a failing institution and keep it operating. The move aimed to prevent a broader shock to mortgage lending by keeping the GSEs open for business while they were reorganized and supported.
The Treasury Department signed Senior Preferred Stock Purchase Agreements (SPSPAs) with each enterprise to keep them from having negative net worth. In exchange for the backstop, Treasury received senior preferred stock, warrants to purchase 79.9% of common stock, and dividend terms that structured how taxpayer support would be compensated.
Alongside the SPSPAs, Treasury announced facilities to purchase GSE-guaranteed mortgage-backed securities (MBS) and to provide a secured credit backstop. These measures were intended to support market confidence and keep mortgage funding flowing when private demand for mortgage securities was weak.
Treasury and FHFA amended and restated the original SPSPAs, continuing the framework for Treasury capital support while the conservatorships were underway. This helped formalize the main terms of the stabilization structure early in the conservatorship period.
As mortgage losses continued, Treasury and FHFA increased Treasury’s funding commitment from $100 billion to $200 billion for each enterprise. The goal was to reassure investors that Fannie Mae and Freddie Mac would remain able to meet obligations, supporting continued mortgage credit availability.
Treasury and FHFA executed the First Amendment to the SPSPAs, reflecting the larger funding commitment for each enterprise. This amendment locked in a bigger federal backstop, reinforcing the conservatorship’s central goal: keep the mortgage finance system functioning through the crisis.
Treasury and FHFA replaced the fixed dollar cap with a formula approach for Treasury’s funding commitment. This change was designed to maintain confidence that the backstop could adjust if losses exceeded earlier expectations, while keeping the basic conservatorship structure in place.
Treasury’s program to purchase GSE-guaranteed MBS ended for new purchases at the close of 2009, as previously planned under HERA authority. Treasury described this as part of winding down special crisis-era support tools while the conservatorships and SPSPAs continued.
The short-term secured credit facility for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks terminated at the end of 2009. Treasury reported that the facility had not been used, indicating it functioned mainly as a confidence backstop rather than a funding source.
FHFA directed both enterprises to delist their common and preferred shares from the New York Stock Exchange and other national exchanges after prolonged low share prices. Trading moved to over-the-counter quotation systems, reflecting how conservatorship and ongoing federal support had reshaped their investor-facing status.
Fannie Mae’s common stock began trading on the OTC Bulletin Board, following the delisting process directed by FHFA. The shift marked a visible endpoint to the 2008–2010 stabilization phase: the enterprises continued operating under conservatorship with Treasury support, but no longer as regularly listed exchange-traded companies.
Fannie Mae and Freddie Mac conservatorships and stabilization measures (September 2008–2010)