Magazine article Mortgage Banking

OFHEO, GSEs Provide $200 Billion to Aid Mortgage Liquidity

Magazine article Mortgage Banking

OFHEO, GSEs Provide $200 Billion to Aid Mortgage Liquidity

Article excerpt

The Office of Federal Housing Enterprise Oversight (OFHEO), Fannie Mae and Freddie Mac announced in March a major initiative to increase liquidity in support of the U.S. mortgage market.

The initiative is expected to provide up to $200 billion of immediate liquidity to the MBS market.

OFHEO estimates that Fannie Mae's and Freddie Mac's existing capabilities, combined with this new initiative and the lifting of the portfolio caps announced in February, should allow the government-sponsored enterprises (GSEs) 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, according to OFHEO Director James Lockhart.

"Fannie Mae and Freddie Mac have played a very important and beneficial role in the mortgage markets over the last year," said Lockhart. "Both companies have prudent cushions above the OFHEO-directed capital requirements and have increased their reserves. We believe they can play an even more positive role in providing the stability and liquidity the markets need right now."

To support growth and further restore market liquidity, OFHEO announced 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. …

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