NAHB Says OFHEO Needs to Do More than Lift Caps on Fannie, Freddie

Washington, D.C.–The Office of Federal Housing Enterprise Oversight (OFHEO) announced recently that it would allow Fannie Mae and Freddie Mac to purchase and hold more home loans in their portfolios. While this is a step forward in helping ease the mortgage credit crunch, more needs to be done, the National Home Builders Association (NAHB) said in a statement. “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,” says Jerry Howard, executive vice president and CEO of NAHB. “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 remove the current capital surcharge on the GSEs to allow them to become more active in buying mortgages.  Currently, OFHEO is requiring Fannie Mae and Freddie Mac to hold 30 percent more capital in addition to the minimum legal requirement. OFHEO now says it will consider gradually decreasing the capital surcharge, with reductions dependent on company financial health, market conditions and breadth of mission obligations (which have temporarily been expanded).Furthermore, the capital penalty raises costs for the GSEs, so both Fannie Mae and Freddie Mac have taken several steps in recent weeks to raise lending fees, which result in higher costs for home buyers at a time when the housing market is struggling to stay afloat. Just last week, Freddie Mac announced it would impose additional lending fees and stricter down payment 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 their 30 percent capital surcharge,” says Howard. “In turn, the two GSEs need to repeal their recent fee hikes to lower borrowing costs for struggling consumers.”