Industry NewsMortgage

Regulator sees increased risk to Fannie, Freddie

Companies backed or bought 3 in 4 home loans in Q4 '07

Fannie Mae and Freddie Mac largely rose to the challenges posed by the credit crunch, purchasing or guaranteeing three out of four mortgages in the fourth quarter of 2007, compared with about one in three loans the year before, federal regulators said in their annual report to Congress. But "extraordinary declines" in housing and mortgage markets have "greatly increased" Fannie and Freddie's credit and interest-rate risks, and there is increasing pressure for the government-chartered loan financers to do even more to support the mortgage market, said James Lockhart, director of the Office of Federal Housing Enterprise Oversight in his introduction to the report. Although Fannie and Freddie have made strides in fixing management and accounting problems that forced both companies to restate several years of earnings, further expansion of their role in providing liquidity to mortgage markets is "problematic" in the absence of legislation fro...