Wow, maybe they really mean it this time.

The Federal Housing Finance Agency (FHFA) has issued a request for proposals from contractors who would develop a "roadmap" for recapitalizing the government sponsored enterprises (GSEs) as a prelude to releasing them from conservatorship. According to the request's statement of work, the contractor will be expected to "provide financial institutions, capital markets and restructuring expertise, analysis, and advisory services regarding the preparation of the Roadmap for recapitalizing the GSEs (Phase I) and, if necessary, the implementation and on-going monitoring of the Roadmap (Phase II).

FHFA, which has acted as conservator of the two GSEs, Fannie Mae and Freddie Mac, since August 2008, says it is issuing the request pursuant to the Housing Finance Reform Plan issued by the Department of the Treasury on September 5, 2019. The plan sets out a series of goals for administrative and legislative reforms of the housing finance system. Among the reforms the plan states, "In parallel with recapitalizing the GSEs, FHFA should begin the process of ending the GSEs' conservatorships." In addition, the Plan identifies a series of options to be considered to recapitalize the GSEs, stating "Each of these options poses a host of complex financial and legal considerations that will merit careful consideration as Treasury and FHFA continue their effort, already underway, to identify and assess these and other strategic options."

The Roadmap which FHFA hopes to develop must, according to the request for proposals, "consider a variety of options with regard to business and capital structures, market impacts and timing, and available capital raising alternatives, among other things.

The successful contractor is expected to have advanced knowledge and familiarity with: the mortgage finance system; capital, governance and business models; asset classes; and the GSEs' roles in financial markets as well as possessing knowledge of and demonstrated success in the areas of financial restructuring and capital raising for large, complex financial institutions.

The statement of work lays out a series of bullet points for services the contractor is expected to provide

  • Options and recommendations for business and financial restructuring transactions and alternatives.
  • Financial projections and sensitivities, including review and assessment of modeling of the Enterprises' financial projections and estimates.
  • Capital raising options, timing, and feasibility.
  • Regulatory framework, including but not limited to a framework for capital restoration plans.
  • Potential revisions to the Treasury Senior Preferred Stock Purchase Agreements (PSPAs).
  • Enterprise activities and changes necessary to develop and effectuate the Roadmap.
  • Costs, structures, pricing, and terms and conditions of transactions proposed as part of implementing the Roadmap, and suggested modifications.
  • Strategic communications, in conjunction with public relations counsel.
  • Other financial advisory services as may be mutually agreed.

The request for proposals has what seems to be a fairly short timeline - those proposals are due by October 15. The award will be for a Firm-Fixed-Price contract and will be awarded under a type of authority with a size standard not to exceed $38.5 million  The initial contract is expected to run for 12 months with one six-month option for Phase I and four one-year options for Phase 2 if it is exercised.