Schumer Bill Would Lift GSE Portfolio Caps

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Congress and the Administration may be headed for a clash on yet another front - the size of Freddie Mac and Fannie Mae's owned portfolios.

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.

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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 limits.

Under Schumer's legislation the increases of portfolio caps and loan limits would expire after one year.

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It is crucial that Fannie and Freddie Mac's caps are raised immediately. We are having a credit crunch that is becoming a worldwide Recession. Yes Greenspan blew it big time and history will deal with him appropriately. But now we have a credit crisis in the mortgage and bond markets and banks do not trust each other to lend. That is what Fannie and Freddie can alleviate. As an American taxpayer it is time to do this and instill some leadership for the domestic and international community. Time to step up Bush....and stop the delay or the Republican's are toast in November 2008!

Above Posted By: Martin | Mon, 21 Jan 2008 16:29:14 EST

Raising portfolio caps and/or allowwing the GSEs to purchase jumbos won't cure what is ailing the economy. We are overdue for a painful correction in housing prices, which have been artificially inflated over the past ten years due to very low interest rates that created a seller's market. This correction is going to weed out a lot of chaff in the real estate and mortgage industries and will drop tens of thousands, if not millions, of house prices below the $417,000 mark.

Above Posted By: TrueRates | Thu, 13 Sep 2007 08:38:56 EST

So much for fiscal restraint or responsibility especially with Freddie and Fannie's past troubles respectively. But what does Schumer care with his woeful lack of any understanding of tax policy, economics, financial services etc. It's not his money. But this initial response is far better than most Democratic responses: turn it over to the trial bar.

Above Posted By: private ryan | Tue, 11 Sep 2007 13:11:48 EST

This is only putting a small band-aid on the problem, economically it is a bail out for the banks not helping the consumer . The foreclosures the banks are getting back & trying to recover their losses are probally in the range of 20-30% below principal balance of their loans.

Above Posted By: Jeff | Tue, 11 Sep 2007 13:09:20 EST

Schumer Bill Would Lift GSE Portfolio Caps

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