Federal Housing Finance Agency (FHFA)

Updated 2026-05-17

The Federal Housing Finance Agency (FHFA) is an independent federal agency responsible for the regulation and supervision of Government Sponsored Enterprise (GSE), Government Sponsored Enterprise (GSE), and the 11 Federal Home Loan Banks. These entities are collectively referred to as Government Sponsored Enterprise (GSE)s (GSEs).

Establishment and Mandate

The FHFA was established by the Housing and Economic Recovery Act of 2008 (HERA). HERA was a landmark federal statute enacted in response to the subprime mortgage crisis, with primary goals to modernize the regulation of GSEs, stabilize the housing market, and help homeowners avoid foreclosure.

HERA granted the FHFA broad authority, including the power to place the GSEs into conservatorship or receivership, which it did shortly after the act's passage.

Mission

The FHFA's overarching mission is to ensure the safety and soundness of the GSEs, thereby promoting a stable and liquid housing finance market.

Key Responsibilities

A primary responsibility of the FHFA, mandated by HERA, is to annually adjust the Conforming and High-Balance Loan Limits for conventional loans. These limits dictate the maximum loan amount that can be purchased by Fannie Mae and Freddie Mac. The adjustments are determined by the October to October percentage increase or decrease in average housing prices, based on a formula specified within HERA.

Impact on Mortgage Lending

The FHFA's role in setting conforming loan limits has a direct impact on the broader mortgage market:

• Conforming Loan Market: By defining the limits for conforming loans, the FHFA influences the types of loans that can be readily bought and sold in the secondary market, affecting interest rates and availability for borrowers.
• High Balance Loans: The conforming loan limits set by FHFA are adopted by other entities, such as Federal Housing Administration (FHA), to define their own categories, demonstrating the cascading effect across various federal mortgage programs.
• Market Stability: The regulatory framework created by HERA and enforced by the FHFA aims to prevent future housing market crises by strengthening oversight of the GSEs and promoting responsible lending practices.