Plans Would Boost Funds for Mortgages

NEW YORK -- The Bush administration, in an effort to stabilize the housing market, is preparing two new initiatives aimed at creating more funding for mortgages by relaxing constraints on Fannie Mae, Freddie Mac and the Federal Housing Administration. Both efforts are in advanced planning stages, though neither has received final approval, The Wall Street Journal reported Tuesday.

The Office of Federal Housing Enterprise Oversight (OFHEO), which regulates Fannie Mae and Freddie Mac, is close to reducing -- but not eliminating -- an excess-capital requirement for the government-sponsored entities, people familiar with the matter said. This would give the companies more flexibility to buy and securitize loans. That, in turn, would allow the companies to play a bigger role in helping the housing market regain its footing, the paper reported.

Fannie Mae and Freddie Mac would both be expected to raise more capital, providing more of a shock absorber against potential losses, the paper reported.

Federal Reserve Chairman Ben Bernanke met with Fannie Mae Chief Executive Daniel Mudd Monday. The session had been scheduled for several weeks. Both Bernanke and Treasury Secretary Henry Paulson have urged Fannie Mae and Freddie Mac to raise more capital. That would give the companies more leeway to pump liquidity into the conforming- and jumbo-loan markets, the paper reported.

-- NYSSCPA.org News Staff

Posted on 3/18/08