Congress and the Administration may be headed for a clash on yet another front
- the size of Freddie Mac and Fannie Mae's
On Monday Senator Charles Schumer (D-NY) introduced legislation
that would provide about $72.5 billion to refinance mortgages for borrowers
whose loans have or are about to reset to higher rates. The bill would also
allow Freddie and Fannie to buy more mortgages in order to relieve in part the
credit crunch which is preventing cash-strapped borrowers from refinancing.
The bill lifts the present cap on Freddie Mac and Fannie Mae's mortgage portfolios
by 10 percent which the Senator says will allow the two government sponsored
enterprises (GSEs) to pump about $145 billion into new lending. The bill would
also permit the companies to purchase so-called "jumbo
those with a value over $417,000 which would allow Freddie and Fannie to assist
borrowers in areas of the county with more expensive housing.
The Bush Administration and James Lockhart, the head of the Office of Federal
Housing Enterprise Oversight (OFHEO) which regulates the two GSEs have rejected
suggestions that the two corporations should be allowed to purchase and hold
more mortgages. Both the President and Director Lockhart in similar statement
alluding to accounting irregularities discovered three years ago suggested that
the GSEs should exhibit more fiscal oversight before they were allowed to increase
the sizes of their respective portfolios. Both GSEs have already petitioned
OFHEO asking for what would amount to an emergency increase in their portfolio
Under Schumer's legislation the increases of portfolio caps and loan limits
would expire after one year.