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Fannie, Freddie Ramping Up to Buy Jumbo Mortgages
 NAHB leaders in Orlando earlier this month during the International Builders’ Show were told that Fannie Mae and Freddie Mac will begin purchasing home loans above the current $417,000 conforming loan limit within weeks of receiving clearance from federal regulators.
On Feb. 13, the same day that President Bush signed a $168 billion economic stimulus package allowing the two housing government sponsored enterprises (GSEs) to purchase loans up to $729,750 through the end of this year, Freddie Mac CEO Richard Syron and Fannie Mae CEO Dan Mudd pledged to work with NAHB to stabilize the housing sector.
“Our fates are clearly intertwined, during every market cycle, but particularly so at this moment,” Syron said. “When the GSEs are most successful — providing liquidity, stability and affordability to the housing finance market — home builders are more successful as well. So whatever comes our way in 2008, let’s continue to stand together. Because in these tough times, that is what will make us both strong.”
 “Your priorities are our priorities,” Mudd said minutes after Syron addressed a meeting of the NAHB Joint Executive Board, Budget and Resolutions Committees.
With the short time frame they have been given to help shore up the jumbo loan market, Fannie Mae and Freddie Mac need to move as rapidly as possible to help buyers seeking homes in high-priced markets such as California and the Northeast, and both Syron and Mudd vowed to do their part.
“We have to go through a review with our regulator to make sure we are handling operational risk properly,” said Syron. “We don’t know how long this process will take. Our objective is that we will be able to get into the market within a month” after receiving approval from the Office of Federal Housing Enterprise Oversight (OFHEO).
“We are ramping up to implement the temporary increase in GSE loan limits,” added Mudd. “We’ve already begun reaching out to our lenders to begin financing these jumbo-conforming loans as soon as possible.”
Syron said that the sooner the GSEs can start purchasing jumbo loans, “the better off we all are. The higher limits should allow the GSEs to inject liquidity and thus help enable reduced rates within the jumbo market, which in total includes some half a million families — including hundreds of thousands of middle-class families in high-cost markets.”
Stemming Foreclosures
The two GSE leaders also said that they are taking aggressive action to help struggling home owners to avoid foreclosure.
Fannie Mae's HomeStay initiative has helped 68,000 home owners refinance subprime ARMs into safer 30-year fixed-rate prime mortgages, said Mudd. The Home Saver Advance program, designed to aid delinquent borrowers who are at least three payments behind on their mortgages, has helped 43,000 people to stay in their homes. And Fannie Mae has vastly beefed up its own foreclosure operations in Dallas.
“We are doing everything we can to help home owners avoid foreclosure, which is a loser for everybody,” said Mudd.
Freddie Mac has introduced SafeStep Mortgages, which are designed to give subprime borrowers more sustainable mortgage options.
“We’ve also consistently been at the forefront of efforts to help borrowers avoid foreclosure,” said Syron. “Last year, Freddie Mac and its servicers helped nearly 47,000 borrowers avoid foreclosure and keep their homes.”
On a related note, Richard Dorfman, president of the Federal Home Loan Bank of Atlanta, told the NAHB meeting that the Federal Home Loan Banks are well capitalized and doing everything in their power to inject capital into the mortgage finance system.
“The 12 Federal Home Loan Banks have never been healthier or more highly robust,” said Dorfman. “Our credit flows into thousands and thousands of communities across America. We have the mandate to make liquidity and we do so.”
For more information, e-mail Michelle Hamecs at NAHB, or call her at 800-368-5242 x8425.
Photos by Oscar Einzig
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