Federal Regulator Criticizes Stimulus Plan’s Housing Provisions
- Feb 08, 2008
Washington, D.C.–The director of the Office of Federal Housing Enterprise Oversight– which supervises federally chartered mortgage companies–said Thursday that the stimulus plan’s measure to increase Fannie Mae and Freddie Mac’s loan limits could take loan money away from less expensive housing, the Washington Post reports.According to James B. Lockhart III, funding one $600,000 mortgage requires as much capital as backing three $200,000 loans.The economic stimulus package Congress approved Thursday would allow Fannie Mae and Freddie Mac to purchase or guarantee mortgages greater than its current $417,000 limit for a year. Speaking to the Senate Banking Committee, Lockhart said the higher limits would cause both government-backed lenders to become extremely involved in some of the country’s most precarious real estate markets.Some legislators have expressed concern that the stimulus measures will allow the mortgage companies to increase business without any additional regulatory rules. However, Freddie Mac chief executive Richard F. Syron said establishing the new, larger loan limit systems will be expensive and “kind of a bear to do.”Fannie Mae and Freddie Mac purchase mortgages and also package mortgages into securities, which are then sold to investors. The lenders agree to pay the loans if the borrowers default.Both Democratic and Republican lawmakers have called for increased regulation of Fannie Mae and Freddie Mac for years. Multibillion-dollar accounting scandals in 2003 and 2004 indicated the companies lacked effective internal controls.