The Office of Federal Housing Enterprise Oversight (OFHEO) announced Wednesday that it would be lifting the caps it had imposed several years ago to limit growth of Freddie Mac's and Fannie Mae's owned portfolios.
The caps had been instituted after both of the huge government sponsored enterprises (GSEs) had run into a lot of trouble over their rather creative accounting standards, their inability to file audited financial statements in a timely manner, and concerns over the two corporation's capital reserves.
OFHEO director James Lockhart made the announcement after Fannie Mae filed
its 2007 financial statements on time and Freddie Mac said it would file its
3007 reports on Thursday. The caps will be removed effective March 1.
There has been considerable pressure from the mortgage industry and from some Congressional committees to lift the caps in order to free up more money for mortgages. The caps have limited the ability of Freddie and Fannie to purchase packages of residential mortgages that might not otherwise find a market in the present credit atmosphere.
Each of the GSE's has also been under a consent order which required them to, among other things, maintain a 30 percent capital cushion. These will stay in place for the time being but Director Lockhart said that OFHEO is working with them to undertake a thorough review and validation of the work they are doing to complete the requirements of their Consent Orders. "To the extent that OFHEO finds the Enterprise has fulfilled the requirements of its Consent Order and the Enterprise has continued to file timely audited financial statements, OFHEO will left the Consent Order,- and will discuss with management the gradual decreasing of the current 30 percent OFHEO-directed capital requirement."