Federal Housing Finance Agency Director James Lockhart, who oversees mortgage-finance companies Fannie Mae and Freddie Mac, said he is “working hard” with other federal regulators to push home-loan interest rates down.
“Treasury’s actions to strengthen confidence in Fannie Mae and Freddie Mac will continue to support lower mortgage interest rates, which will continue to support the overall housing market,” Lockhart said in prepared remarks today in Washington to the Asian Real Estate Association of America and National Association of Hispanic Real Estate Professionals.
Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac own or guarantee more than 40 percent of the $12 trillion U.S. residential mortgage market. FHFA seized control of the companies on Sept. 6 and forced out management after examiners said the two may be at risk of failing.
Freddie and Fannie have since become part of Obama’s plan to help 9 million Americans avoid foreclosure amid the worst housing slump since the Great Depression. Regulators have been pressuring the companies to offer low-cost mortgage refinancings, waive loan standards and take other steps to help boost the housing market.
As part of the takeover, the Treasury in September pledged to buy $100 billion of each company’s preferred stock as needed when the value of their assets drops below the amount they owe on obligations. On Feb. 18, it doubled that funding commitment.
“The U.S. government has made it critically clear to every investor that it is standing behind Fannie Mae, Freddie Mac, and the Federal Home Loan Banks,” Lockhart said today. “That is why I call it an effective guarantee. These programs have had a very positive impact on mortgage rates.”
Fannie and Freddie were chartered by the government -- and later sold to shareholders -- primarily to lower the cost of homeownership. The companies buy mortgages from lenders, freeing up cash at banks to make more loans. They profit on the difference between their cost of borrowing and the yield on the debt. They also guarantee and package loans as securities for a fee.
To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net.
