 The government's latest attempt at easing the housing crisis will provide an additional $200 billion to financial giants Freddie Mac and Fannie Mae in an initiative to increase liquidity to the mortgage-backed securities market. The Office of Federal Housing Enterprise Oversight (OFHEO) announced a $200 billion dollar pipeline to Fannie and Freddie yesterday in a bold step to reestablish the flow of funds from investors through lenders to borrowers. New rules would require Fannie Mae and Freddie Mac to reduce excess capital in reserve to 20%, down from 30%. The move will permit them to do more in the jumbo temporary conforming market, subprime refinancing and loan modifications areas. Further reductions will be considered in the future. Daniel Mudd, President and CEO of Fannie Mae said, "We are working with our customers, regulators and policy makers to minimize foreclosures, increase affordability - and as of today - to restore liquidity in the market. This progressive, sustainable plan will help bring the stability the market needs."
Congress has also recently raised the loan limits that the two firms can buy from $417,000 to $729,750. This in turn has caused an increase in the demand for their capital, as well as an increase in the risks for both firms. (Written by: K. Skowronski) Article Sources
Related Articles |
