OFHEO was established as an independent entity within the Department of
Housing and Urban Development by the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992 (Title 13 of P.L. 102-550). The
agency is headed by a Director appointed by the President for a five-year
term.
OFHEO’s primary mission is ensuring the capital adequacy and financial
safety and soundness of two government-sponsored enterprises, the Federal
National Mortgage Association (Fannie Mae) and the Federal Home Loan
Mortgage Corporation (Freddie Mac). Fannie Mae and Freddie Mac are
congressionally-chartered, publicly-owned corporations whose shares are
listed on the New York Stock Exchange.
Fannie Mae and Freddie Mac are the nation’s largest housing finance
institutions. They buy mortgages from commercial banks, thrift institutions,
mortgage banks, and other primary lenders, and either hold these mortgages
in their own portfolios or package them into mortgage-backed securities for
resale to investors. These secondary mortgage market operations play a major
role in creating a ready supply of mortgage funds for American homebuyers.
Combined assets and off-balance sheet obligations of Fannie Mae and
Freddie Mac were more than $4.2 trillion at year-end 2005, which represents
over 40 percent of mortgages outstanding.

In fulfilling its role in the secondary mortgage market, OFHEO promotes housing and
a strong national housing finance system. 

OFHEO’s oversight responsibilities include the following:
- Conducting broad-based and targeted examinations of Fannie Mae and
Freddie Mac
- Making quarterly findings of capital adequacy based on a minimum
capital standard and a risk-based capital standard
- Administering a risk-based capital standard, using a “stress test” that
simulates interest rate and credit risk scenarios
- Prohibiting excessive executive compensation
- Issuing regulations concerning capital and enforcement standards
- Taking necessary enforcement actions
- Issuing an annual Report to Congress on the financial and operational
condition of the Enterprises

OFHEO is funded through assessments on Fannie Mae and Freddie Mac.
OFHEO’s operations represent no direct cost to the taxpayer.