Higher cap for Fannie and Freddie?

Jill Barshay Aug 17, 2007
HTML EMBED:
COPY

Higher cap for Fannie and Freddie?

Jill Barshay Aug 17, 2007
HTML EMBED:
COPY

TEXT OF STORY

Doug Krizner: Did you hear the story on Countrywide Financial? Yesterday, the largest mortgage lender in the U.S. tapped in to $11.5 billion in emergency credit to fund its operations. Mortgage lenders like Countrywide are having trouble getting cash in the current credit crunch, but New York Senator Charles Schumer has an idea that could help. Jill Barshay reports.


Jill Barshay: We all know Fannie Mae and Freddie Mac deal in home loans that are $417,000 or less.

They pool those loans and resell them to investors, but Fannie and Freddie also run investment portfolios that can buy almost any kind of mortgage, even subprime and jumbo.

They’ve made lots of money this way, but after a series of accounting scandals, regulators capped the portfolios last year. Senator Schumer wants to raise the cap.

Diane Swonk is Chief Economist at Mesirow Financial in Chicago. She says that could help companies like Countrywide.

Diane Swonk: They can’t sell off the mortgages that they’re holding, and if they can sell off some of the loans they’ve got, that gives them more cash to turn around and lend.

If Fannie and Freddie buy those loans, they’ll inject much-needed liquidity into the system.

But ordinary mortgages are selling just fine, regulators say. They don’t want Fannie and Freddie being used to prop up the subprime and jumbo markets.

In New York, I’m Jill Barshay for Marketplace.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.