NEWS
3/19/2008 11:29:00 AM
Fannie, Freddie surplus capital requirement cut
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BY BUSINESS RECORD STAFF
The federal agency that regulates Fannie Mae and Freddie Mac eased the companies' surplus capital requirement, in an effort to expand their combined $1.5 trillion in mortgage investments and revitalize the U.S. home-loan market, Bloomberg reported.
The Office of Federal Housing Enterprise Oversight (OFHEO) lowered the requirement to 20 percent from 30 percent, the agency said in a news release today. The government-chartered companies, the largest sources of money for home loans, also agreed to raise a "significant" amount of new capital, the OFHEO said.
The initiative could immediately pump $200 billion into the mortgage-backed securities market, said OFHEO Director James Lockhart at news conference today. Combined with a lifting of portfolio caps on March 1 and the companies' existing capabilities, this should allow Fannie and Freddie to buy or guarantee about $2 trillion in mortgages a year, the OFHEO said.
"Our hope is that it will help restart the housing engine that powers our economy," Fannie Mae CEO Daniel Mudd said at a news conference today with Freddie Mac CEO Richard Syron and the OFHEO's Lockhart.
The companies have said they were limited in how much assistance they could offer amid regulatory constraints and rising losses. Fannie Mae, the largest source of money for home loans, posted a record $3.55 billion fourth-quarter loss as rising foreclosures sent credit costs soaring. Freddie Mac reported a record $2.45 billion net loss for the period.
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