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Although the Treasury Department has yet to provide details regarding its GSE reform plans, one option that was once under consideration includes the Federal Housing Finance Agency appointing a receiver to terminate the conservatorships, according to industry sources who have studied the situation.

The next move would have entailed the receiver organizing what’s called a “limited life regulated entity” (LLRE). An LLRE would succeed the charters of Fannie Mae and Freddie Mac. (There would be one LLRE for each GSE.)

In essence, the charters remain in existence and the assets of the “old” Fannie and Freddie could be liquidated or transferred. From there, the two could start to build capital.

GSE watchers, requesting anonymity, maintain that Treasury under former senior counselor Craig Phillips was well aware of the LLRE option, but eventually rejected using receivership as a reform tool. For more details, see the next edition of Inside Mortgage Finance, available late next week.