Today the US Federal agency, the Office of Federal Housing Enterprise Oversight (OFHEO), together with Federal house loan guarantee agencies, Fannie Mae and Freddie Mac announced a major initiative to increase liquidity in support of the
OFHEO estimates that Fannie Mae’s and Freddie Mac’s existing capabilities, combined with this new initiative and the release of the portfolio caps announced in February, should allow the GSEs (government sponsored enterprises) to purchase or guarantee about $2 trillion in mortgages this year. This capacity will permit them to do more in the jumbo temporary conforming market, subprime refinancing and loan modifications areas.
To support growth and further restore market liquidity, OFHEO announced that it would begin to permit a significant portion of the GSEs’ 30% percent OFHEO-directed capital surplus to be invested in mortgages and MBS. As a key part of this initiative, both companies announced that they will begin the process to raise significant capital. Both companies also said they would maintain overall capital levels well in excess of requirements while the mortgage market recovers in order to ensure market confidence and fulfill their public mission.
In return for the reduction, the two firms have committed to raising capital so that they will be able to provide more funding for the home mortgage market. The move should reduce Freddie's capital requirement by about $2.6 billion and Fannie's by $3.2 billion. The two companies, chartered by Congress, acquire home loans from lenders. They hold some as long-term investments and sell others in the form of securities to other investors world-wide. They are the dominant
The troubled
