Schumer files bill to lift GSE portfolio caps.
Schumer's bill, the Protecting Access to Safe Mortgages Act (S. 2036), would temporarily lift the caps on the mortgage portfolios of Fannie Mae and Freddie Mac by 10 percent, which would free up approximately $145 billion for the purchase of new mortgages by the GSEs.
S. 2036 would require half of this total to go specifically toward refinanced mortgages for borrowers whose existing adjustable-rate loans were scheduled for an interest-rate reset between June 2005 and December 2009. This would ensure that the cap-loosening delivers a clear benefit to the subprime segment that first inflamed the mortgage crisis, said Schumer.
"This common-sense measure will deliver a shot in the arm that could make refinancings possible for tens of thousands of Americans trapped in the subprime mess," said Schumer. "Together with nonprofits, lenders and loan servicers, Fannie and Freddie are the missing ingredient to stem the rising tide of foreclosures that is about to hit the economy. The bottom line is that we should be deploying Fannie and Freddie to do the job they were designed to do."
Schumer's legislation also lifts the conforming loan limit for the GSEs by up to 50 percent in "high-cost areas."
This would make higher-cost loans available for purchase by Fannie Mae and Freddie Mac, bringing liquidity to metropolitan areas where the median home price for a single-family home is above the GSEs' current conforming limit of $417,000. The increases on both the portfolio caps and the loan limits would sunset one year following the bill's enactment, said Schumer.
Schumer said his bill was prompted by the rejection by the Office of Federal Housing Enterprise Oversight (OFHEO) of his request to consider temporarily raising the portfolio purchase limits by Fannie and Freddie.
In a Sept. 6 letter to Schumer, OFHEO Director James B. Lockhart noted that OFHEO is working to keep mortgage credit available within the agency's statutory authority.
"OFHEO continues to encourage Fannie Mae and Freddie Mac to contribute to solutions for affected borrowers. Both enterprises have regular and special programs that may provide attractive alternatives for some subprime borrowers exposed to payment shock," wrote Lockhart. "Most new refinance loans of such borrowers can be securitized in the normal course of business. The portfolio caps are not hindering either enterprise's ability to help in this area."
On Sept. 10, the same day that Schumer filed his bill, OFHEO announced the implementation by Fannie Mae and Freddie Mac of both the federal bank regulators' Statement on Subprime Mortgage Lending to their mortgage purchases and that of the Interagency Guidance on Nontraditional Mortgage Product Risks to the purchase of private-label securities.
In August, OFHEO directed the GSEs to apply the principles and practices of the banking regulators' statement to their purchases of sub-prime loans in the regular flow of business, including bulk purchases.
Lockhart said the GSEs have also pledged their continued support of subprime borrowers. Freddie Mac has said it will purchase $20 billion of subprime loans, and Fannie Mae "tens of billions" of subprime loans, over the next several years.
"These actions, which address the practices of both regulated and unregulated mortgage originators, reinforce the historic and statutory role of Fannie Mae and Freddie Mac in promoting market liquidity through standardization of mortgage underwriting," said Lockhart. "OFHEO will continue to work with federal and state regulators, and with Fannie Mae and Freddie Mac, to ensure that the essential mortgage credit needs of borrowers are addressed in conformance with the guidances."
Schumer's bill has been referred to committee.
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|Title Annotation:||Charles Schumer; Safe Mortgages Act (S. 2036); government sponsored-enterprises|
|Comment:||Schumer files bill to lift GSE portfolio caps.(Charles Schumer)(Safe Mortgages Act (S. 2036))(government sponsored-enterprises)|
|Date:||Oct 1, 2007|
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