GSE Changes Could Ease Mortgage Concerns
The two secondary mortgage market giants Fannie Mae and Freddie Mac could help ensure stability in conventional mortgage markets if the government would temporarily lift a restriction on how much in mortgages they can hold in their portfolios, NAR told a federal regulator in a letter sent jointly with the National Association of Home Builders and the Mortgage Bankers Association.

The main function of the two government-sponsored enterprises is to ensure mortgage market liquidity by buying mortgages from lenders and bundling them into securities for sale to investors. But Fannie Mae and Freddie Mac also buy and hold a portion of the loans in their own portfolios.

The companies’ regulator, the Office of Federal Housing Enterprise Oversight, limits this portfolio activity to a combined $1.4 trillion. Easing that limit would send a powerful signal to lenders and borrowers that mortgage markets will remain flush with liquidity, NAR says.

The Financial Services Roundtable, which represents large financial institutions, has sent a letter to OFHEO, saying that easing the portfolio limit makes sense given recent volatility in capital markets. Fannie Mae CEO Daniel Mudd has suggested raising the limit by 10 percent.

For now, no cap hike is planned, although credit availability will be closely watched going forward, OFHEO Director James Lockhart said in a letter to Sen. Charles Schumer (D-N.Y.), who sits on the Senate Finance and Banking committees and has called for a cap hike.

— REALTOR® Magazine Online