The Federal Housing Finance Agency has selected Houlihan Lokey Capital, Inc. as a financial advisor to assist in the development and implementation of a road map to end the conservatorships of Fannie Mae and Freddie Mac.
FHFA Director Mark Calabria had previously stated the plan is to create a competitive mortgage market with a limited government role, as well as ensuring taxpayers never again have to rescue Fannie Mae and Freddie Mac.
“Hiring a financial advisor is a significant milestone toward ending the conservatorships of the Enterprises," said Calabria in a statement. “The next major milestone for FHFA is the re-proposal of the capital rule, which will happen in the near future." The FHFA wants to increase capital retention for Fannie Mae and Freddie Mac. “The [pair] are leveraged nearly 1,000-to-one, ensuring they would fail during an economic downturn –exposing taxpayers once again,” Calabria said previously.
The Contracting Operations Section of the FHFA oversaw the selection process. The contract amount for the first year is $9 million. FHFA has options to extend for an additional four and a half years,with the total contract not to exceed $45 million.
While developing the roadmap, Houlihan Lokey will consider business and capital structures, market impacts and timing, and available capital raising alternatives, among other items as outlined in the previously published Statement of Work. According to its website, Houlihan Lokey is a global investment bank with expertise in mergers and acquisitions,capital markets, financial restructuring, and valuation. Based on annual year-end league table data from Refinitiv (formerly known as Thomson Reuters),the firm was the no. 1 M&A Advisor for all U.S. transactions in 2019 for the fifth consecutive year.