MBA Calls on OFHEO to Allow GSEs More Room to Help Markets

The Mortgage Bankers Association (MBA), the National Association of Home Builders (NAHB) and the National Association of Realtors (NAR) today sent a letter to the Office of Federal Housing Enterprise Oversight (OFHEO) urging them to take action to temporarily increase the caps on the investment portfolios of Fannie Mae and Freddie Mac (the GSEs), with appropriate controls, to help inject needed liquidity and stability into the mortgage market.

The letter states that "The nation`s mortgage markets are facing a liquidity crisis of a force and magnitude not seen in decades. The chill will have far reaching effects throughout the housing market if stability is not restored. A temporary increase in the allowable size of the GSEs` loan portfolios for the purpose of easing this credit crunch would help stem the crisis. 

"An increase in the portfolio caps should be appropriately targeted to assure that GSEs use the increased capacity to help lenders meet the most urgent credit needs, including the private label mortgage-backed securities (MBS) market and mortgages for creditworthy families who would otherwise find it difficult or impossible to obtain a mortgage loan. The authority should be consistent with safety and soundness and include appropriate conditions concerning how long this new capacity will be available to the GSEs, the specific size of the increase, the types of assets eligible for purchase, appropriate reporting and monitoring provisions, and a reasonable schedule for returning to the current limits to avoid future disruptions to the mortgage market.

"Quick and reasonable action is urgently needed to provide liquidity and stability to the mortgage markets and to serve the financing needs of America`s current and aspiring homeowners."

By selling some of the mortgage investments they own and replacing them with certain MBS for which there is not a real market today, Fannie Mae and Freddie Mac could help restore market stability. Additional capacity to invest in and create a market for certain mortgage securities will further aid liquidity in the market and help restore the flow of capital for mortgages, therefore re-establishing confidence in the market. 

Angela C. Waugaman   (202) 557-2829   awaugaman@mortgagebankers.org