Fannie, Freddie Get More Subprime Flexibility

The Office of Federal Housing Enterprise Oversight, which oversees Fannie Mae and Freddie Mac, on Wednesday agreed to allow both companies to buy more subprime loans — a decision that NAR applauds.

Fannie Mae and Freddie Mac will have more flexibility to address problems in the mortgage market, which will benefit the housing market overall, says the NATIONAL ASSOCIATION OF REALTORS®. As a result of Wednesday’s action, more subprime loans will be made available to borrowers and home owners who are having problems refinancing their mortgage.

In providing the ability to make a two percent adjustment to the portfolio limit formula for Fannie Mae, OFHEO director James Lockhart “sends an important signal to America’s home owners and buyers that the government recognizes that there is a major problem and that it is willing to act,” NAR President Pat Combs says.

This week, actions by both houses of Congress to reform FHA programs, and the Federal Reserve to decrease interest rates, should make borrowing more affordable and money more available, Combs says. “With reduced housing prices and increased housing inventory, interest rates that are near historic lows, and now with Fannie’s and Freddie’s increased ability to lend, we may see positive movement in the housing market,” said Combs.

NAR continues to urge Congress to increase Fannie Mae and Freddie Mac’s conforming loan limits, which would help borrowers in high-cost areas who are finding it extremely difficult to secure affordable financing.

“This would have the effect of making more money available for more of our nation’s borrowers,” Combs says.

— REALTOR® Magazine Online