Wednesday, March 19, 2008

Regs Move On Fannie And Freddie Could Finally Drive Rates Down

In a move that is expected to add $200 Billion to the frozen mortgage market, regulators have eased restrictions on the surplus capital requirement for Fannie Mae and Freddie Mac from 30% to 20%. Fannie and Freddie are now expected to fund $2 Trillion in mortgages this year. In conjunction with previous moves like temporarily lifting the amount the agencies can lend from $407,000. to over $700,000 (know by the oxymoron "jumbo conforming loan"), true liquidity may finally return to the mortgage market, resulting in lower rates. Lower rates, of course, would be a great help in slowing or reversing the downturn in housing that has created the "sub-prime" debacle.
Now, let's see if we can really get the jumbo from 7% to where it belongs in the mid-5's!
Capital Requirements Cut For Fannie, Freddie (Jacksonville Business Journal)
Fannie, Freddie Get US Ok To Buy More Mortgages (CBS Marketwatch)
Fannie, Freddie Initiative To Add $200 Billion (CNN Money)
Fannie, Freddie Debt protection Costs Fall (Reuters)

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