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OFHEO Takes a Step to Raise Mortgage Market Liquidity
The Office of Federal Housing Enterprise Oversight (OFHEO) on Feb. 27 moved to help ease the mortgage credit crunch by allowing Fannie Mae and Freddie Mac to purchase and hold more home loans in their portfolios, but more needs to be done, according to NAHB.
"We applaud OFHEO for taking this step to help inject more liquidity into the mortgage markets by giving Fannie Mae and Freddie Mac added flexibility to invest in the housing market," said Jerry Howard, the association’s executive vice president and CEO. "However, OFHEO, the two housing government enterprises (GSEs) and Congress all need to take further action to help struggling home buyers and the ailing housing market."
Specifically, Howard said that OFHEO needs to go a step further by removing the current capital surcharge on the GSEs to allow them to truly become more active in buying mortgages.
Currently, OFHEO is requiring Fannie Mae and Freddie Mac to hold 30% more capital in addition to the minimum legal requirement. OFHEO said last week that it would consider gradually decreasing the capital surcharge, with reductions depending on the financial health of the companies, market conditions and the breadth of their mission obligations, which have been expanded temporarily.
The higher capital requirements have constrained Fannie Mae and Freddie Mac from responding more aggressively to the liquidity problems in the mortgage markets and will also impede their use of the new flexibility on portfolio investments.
The capital penalty also has raised costs for the GSEs, and both Fannie Mae and Freddie Mac have taken several steps in recent weeks to raise lending fees, resulting in higher costs for home buyers at a time when the housing market is struggling to stay afloat.
Just last week, Freddie Mac announced that it would impose additional lending fees and stricter downpayment requirements on borrowers in order to boost its capital reserves.
"Now that Fannie and Freddie have their books in order and have addressed operational concerns, OFHEO should move immediately to rescind its 30% capital surcharge. In turn, the two GSEs need to repeal their recent fee hikes to lower borrowing costs for struggling consumers," said Howard.
Congress also needs to act quickly, Howard said, by passing full GSE reform for Fannie Mae and Freddie Mac that would strengthen regulatory oversight over these financial institutions while also preserving their vital housing mission.
For more information, e-mail Michelle Hamecs at NAHB, or call her at 800-368-5242 x8425.
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 Free NAHB Kit Gives Builders Back-to-Basics Tips to Navigate the Slowdown
What was once expected to be a relatively mild housing slump following three years of record new home construction and sales has given way to a significant downturn.
To help members navigate the uncharted waters of this slowdown, NAHB has compiled a comprehensive “Back to Basics” online toolkit — the best of the basics, the tried and true and the truly new. To access the toolkit, click here.
To access the “Back to Basics” toolkit, you must be an NAHB member and have a login to www.nahb.org. To create a login, go to www.nahb.org/login or click on the log-in button on the main menu bar.
For assistance, call the NAHB Member Service Center at 800-368-5242.
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