September 20, 2007
Fannie Mae to Be Allowed to Expand Its Portfolio
By ERIC DASH
A government regulator gave Fannie Mae permission yesterday to
slightly increase the amount of mortgages it can buy for its
investment portfolio, a move that analysts say will do little to ease
the strain on the housing market.
The regulator, the Office of Housing Enterprise and Oversight, said
Fannie Mae could expand its loan portfolio by 2 percent a year, an
adjustment to a cap it put in place last May after it exposed
widespread accounting problems.
Ofheo said it was also adjusting the method it used to determine the
size of Fannie Mae's mortgage portfolio, which will set the new cap at
$735 million.
The moves, along with similar ones for Freddie Mac, should give the
nation's two biggest mortgage buyers a bit more flexibility in
managing their portfolios. The changes are also intended to encourage
the companies to purchase as much as $20 billion each in subprime loans.
But just two days ago, Ben S. Bernanke, the Federal Reserve chairman,
in a letter to Representative Barney Frank of Massachusetts said
relaxing the portfolio restrictions on Fannie Mae and Freddie Mac
could prove "ill advised."
Wall Street analysts said that Ofheo's changes would do little to ease
the pressures on the housing market. And Fannie Mae, which has lobbied
to raise the portfolio limit by 10 percent, and several Democratic
lawmakers said yesterday that the moves did not go far enough.
In a statement, Senator Christopher J. Dodd of Connecticut, the
chairman of the Banking Committee and a Democratic candidate for
president, called Ofheo's decision "timid and inadequate." He said the
administration was ignoring the severity of the subprime mortgage crisis.
Others, however, suggested it could be a way for Fannie Mae and
Freddie Mac to start regaining Ofheo's trust.
"I actually think this was a smart way of giving the enterprises an
opportunity to prove themselves," said Josh Rosner, a managing
director at Graham Fisher & Company who has been critical of Fannie
Mae. Under the requirements, Fannie Mae and Freddie Mac must provide
more frequent and detailed financial disclosures, including a monthly
report that should more clearly parse out their purchases of subprime
loans.
Ofheo's announcement came as the Senate Banking Committee voted
20-to-1 to approve legislation raising a separate limit on home loans
made through the Federal Housing Administration. That could help
prospective home buyers in higher-cost areas like California and New
York but do little to ease the bigger challenge faced by homeowners
who may lose their homes if they fall further behind on their payments.
If yesterday's bill is passed by the full Senate, it would need to be
reconciled with legislation passed in the House.
It also came just two days after Mr. Bernanke sent a letter to Mr.
Frank, the chairman of the House Financial Services Committee, that
defended the current portfolio limits and urged Congress to move
cautiously if it considers letting Fannie Mae and Freddie Mac buy
mortgages over the current $417,000 limit.
In the letter, he suggested that allowing the companies to buy
higher-priced mortgages would extend an "implied guarantee to another
portion of the mortgage market."
"If the Congress is inclined to move in this direction, it should
consider whether such action could be taken in a way that makes the
change explicitly temporary as well as promptly implemented, lest it
inhibit private securitization activity in the interim," Mr. Bernanke
wrote.
Yahoo! Groups Links
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/AsburyPark/
<*> Your email settings:
Individual Email | Traditional
<*> To change settings online go to:
http://groups.yahoo.com/group/AsburyPark/join
(Yahoo! ID required)
<*> To change settings via email:
mailto:[EMAIL PROTECTED]
mailto:[EMAIL PROTECTED]
<*> To unsubscribe from this group, send an email to:
[EMAIL PROTECTED]
<*> Your use of Yahoo! Groups is subject to:
http://docs.yahoo.com/info/terms/
