Freddie CEO: Mortgage Cap Can Be Lifted Temporarily

Freddie Mac CEO Richard Syron told CNBC that the home-loan provider needs to be able to invest in jumbo loans for about two years in order to help remedy the subprime crisis.

“We think on a temporary basis that for the country’s sake it be a good thing to have us participate in that market,” Syron said in an interview.

Syron spoke after Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson told a House committee that they'd be willing to allow both Freddie Mac and Fannie Mae to buy so-called jumbo loans on a temporary basis. Both are currently barred from investing in jumbo mortgages, which are $417,000 and above.

Bernanke and Paulson dropped some of their resistance to expanding the role of Fannie Mae and Freddie Mac because they said the companies could help restore funding for the largest home loans, which has dried up.

Syron and Fannie Mae CEO Daniel Mudd also spoke at the hearing and issued a fresh appeal to lift the cap on their investments.

Removing the cap, Syron told CNBC, might help the liquidity problems that exist. But there’s another issue, “I think there’s a confidence problem,” said Syron.

Rates on new jumbo mortgages have risen sharply in recent weeks as lenders have found few investors willing to take them off their hands.

“They need to have the same equivalency they have in the subprime market that they have in the jumbo market,” remarked Syron. Given the severity of the housing situation, Syron said he's  looking for a temporary period of easing of about two years.  

© 2008 CNBC.com