GSE Portfolio Increase Urged to Ease Credit Crunch
As part of its efforts to restore the health of the nation’s mortgage markets, NAHB, along with the Mortgage Bankers Association and the National Association of Realtors®, has called on the Office of Federal Housing Enterprise Oversight (OFHEO) to temporarily increase the caps on the investment portfolios of housing government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.
“The nation’s mortgage markets are facing a liquidity crisis of a force and magnitude not seen in decades,” the organizations wrote to OFHEO Director James Lockhart on Aug. 13. “The chill will have far-reaching effects throughout the housing market if stability is not restored. A temporary increase in the allowable size of the GSEs’ loan portfolios for the purpose of easing this credit crunch would help stem the crisis.”
In an Aug. 10 statement, Lockhart indicated that he was not authorizing any significant change in portfolio caps for the GSEs, which were put in place in 2006 because of safety and soundness issues.
Lockhart was responding to a request by Daniel Mudd, president and chief executive officer of Fannie Mae, for a 10% increase in the holdings of Fannie Mae’s mortgage-related portfolio. “We believe this action, in conjunction with actions taken by the Federal Reserve Board and others, would help to alleviate the ongoing credit crunch in the markets and bring an additional measure of stability,” said Mudd.
While the request was turned down, Lockhart said that OFHEO was exploring ways for the GSEs “to enhance their support for affordable housing, both multifamily and single-family” and that it would “keep under active consideration requests for an increase in the portfolio caps.”
In their letter to OFHEO, NAHB and the other industry groups noted that “the portfolio caps should be appropriately targeted to assure that GSEs use the increased capacity to help meet the most urgent credit needs, including the private label MBS market and mortgages for creditworthy families who would otherwise find it difficult or impossible to obtain a mortgage loan.”
The groups said that “quick and reasonable action is needed to provide liquidity and stability to the mortgages markets and to serve the financing needs of America’s current and aspiring home owners.”