The Federal Housing Finance Agency (FHFA) has published a final rule requiring Fannie Mae and Freddie Mac to come up with resolution plans should the FHFA be appointed their receiver in the case of crisis.

The plans — essentially a sort of “living will” for each government-sponsored enterprise (GSE) — would “facilitate a rapid and orderly resolution” if either Fannie or Freddie fail and are put under FHFA control. According to FHFA Director Mark Calabria, the finalization of the living will rule is one of the last major regulatory hurdles on the GSE’s path to release from government conservatorship.

“Just like other large financial institutions, these plans will provide Fannie Mae, Freddie Mac and FHFA with a roadmap for preserving business continuity should they fail again,” he said. “This rule helps create a stronger, more resilient housing finance system by protecting taxpayers and the mortgage market from harm if either Enterprise fails.”

The final rule is similar to one established under the Dodd Frank Act that requires many large financial institutions to craft similar living wills. Under the newly published rule, the GSEs must demonstrate how core or important business lines would be maintained to ensure continued support for mortgage finance and stabilize the housing finance system in the case of a large-scale failure. Each plan must identify and describe “potential material weaknesses or impediments” to a swift solution to a crisis situation, as well as the steps taken (or proposed to take) to address those weaknesses. The plans must also specifically describe how to compensate investors for losses and to fund the resolution of either company.

These plans must be submitted two years after the release date of the final rule, with updated resolution plans filed every two years afterward. Those plans would then be subject to FHFA review.