From the comment:
The Center for Responsible Lending (CRL) appreciates the opportunity to comment on the Federal Housing Finance Agency’s (FHFA) Resolution Planning proposed rule. FHFA seeks comment on a proposal that would require Fannie Mae and Freddie Mac (GSEs) to develop plans to facilitate their rapid and orderly resolution in the event FHFA is appointed receiver pursuant to 12 U.S.C. 4617. Such a resolution plan, also known as a living will, is to ensure that there is a contingency plan for how a large financial institution will sell off assets or be liquidated without causing turmoil elsewhere in the financial system.
Currently, only the largest banks are required to have a resolution plan. This makes sense, as banks of such enormous size typically have hundreds of operating subsidiaries, including in countries outside the United States. A large bank failure could have major ripple effects throughout the national and global economy. It is critical to have a methodical method to wind down such complex institutions.
Yet, such a framework is illogical for a GSE. The GSEs are distinct from banks in several material ways: 1) GSEs are simpler entities with lower risks, 2) the GSEs receive government support through the Preferred Stock Purchase Agreements (PSPAs), and 3) the GSEs are chartered to fulfill a significant and specific mission, which makes receivership a far less desirable policy outcome. Moreover, a living will is likely to add unnecessary uncertainty and cost to the overall mortgage market.