Fannie Mae Steps into Mortgage Market to Relieve Ginnie Mae Credit Crunch

American Banker, April 16, 1986 | Go to article overview

Fannie Mae Steps into Mortgage Market to Relieve Ginnie Mae Credit Crunch


Fannie Mae Steps into Mortgage Market To Relieve Ginnie Mae Credit Crunch

The Federal National Mortgage Association, Fannie Mae, is positioning itself to take advantage of the short-term credit crunch expected in the housing market.

Fannie Mae said on Tuesday it will step into the mortgage market and buy loans normally used to back Government National Mortgage Association, or Ginnie Mae, mortgage-backed securities.

The association said mortgage lenders on Wednesday will receive mailgrams announcing that Fannie Mae will purchase Federal Housing Administration and Veterans Administration mortgages. The purchases will occur until credit authority has been restored to Ginnie Mae, which traditionally supplies FHA and VA mortgage guarantees.

Last week, Ginnie Mae halted guarantees of new securities backed by FHA and VA mortgages because it had hit its $65.3 billion ceiling for fiscal 1986.

Housing and finance groups say the Ginnie Mae absence will disrupt the mortgage markets, forcing homebuyers to pay more for mortgages and possibly making 25,000 buyers of homes per month ineligible for housing finance.

Other sources say the interim steps announced last Friday by Freddie Mac --the Federal Home Loan Mortgage Corp.--and by Fannie Mae this week to support mortgage-backed securities should minimize disruption until Ginnie Mae's credit ceiling is reauthorized.

David Jeffers, a Fannie Mae spokesman, said that Fannie Mae has always had the capability to purchase FHA/VA loans, but had not pursued the business since Ginnie Mae was generally able to do the same thing at less expense. Some 6% of Fannie Mae's mortgage-backed securities business has been FHA/VA mortgages, he said.

Mortgage lenders are "confused' over the Ginnie Mae halt, Mr. Jeffers said in explaining Fannie Mae's reason for sending mailgrams to lenders. Housing experts note that lenders normally will not provide FHA or VA mortgages without the ability to package the loans as mortgage-backed securities which are guaranteed by Ginnie Mae.

Warren Lasko, executive vice president of the Mortgage Bankers Association of America, this week called the Ginnie Mae halt "very serious, almost tragic.' He urged Congress to raise the agency's fiscal 1986 guarantee authority to $125 billion from $65.3 billion.

In the House on Tuesday, Rep. Chalmers Wylie, R-Ohio, introduced legislation that would raise Ginnie Mae's ceiling on guarantees and head off a similar shutdown facing the Federal Housing Administration. Reps. Fernand St Germain, D-R.I., Henry Gonzalez, D-Tex., and Stewart McKinney, R-Conn. also sponsored the bill.

The bill would raise Ginnie Mae's ceiling to $100 billion and the FHA ceiling to $95 billion. …

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