Back on Saturday 3/22/08, I wrote and posted an article on this blog titled "Fannie & Freddie Get a Little Help From Their Uncle Sam" which mentioned that Fannie Mae and Freddie Mac agreed to expand their puchases of U.S. mortgages and related securities after President Bush reduced the amount of capital these companies are required to hold as a cushion against lossses (monies held in reserve).
To bring you up to date on this, contracts to buy mortages by these two major government-backed lenders were up sharply in March. Freddie Mac has reported that portfolio mortgage purchase and sales agreements hit $43.5 billion, up from $14.8 billion in February this year. Fannie Mae reported that mortgage commitments increased to $31 billion in March, up from $25 billion in February.
The Office of Federal Housing Enterprise Oversight (OFHEO) said that both Fannie Mae and Freddie Mac, which either own or guarantee at least 40% of the oustanding U.S. residential mortgage debt, should be able to purchase or guarantee $2 trillion in mortgages in 2008. In February, the OFHEO lifted the $1.5 trillion cap on loans and mortgage-backed securities that Fannie Mae and Freddie Mac were allowed to buy and hold.
The reason this is important is obvious. The more mortgages Fannie and Freddie can purchase, the more stability there will be in the mortgage-backed securities market and the real estate market. It will also give lenders a sense of ease. This is all part of getting the housing market back on its feet and moving forward again.
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