U.S. News

Fannie, Freddie Loan Limits Won't Be Eased by Regulators


The government on Friday said it will not ease investment limits on home-loan finance giants Fannie Mae and Freddie Mac but didn't rule out an eventual increase.

Both Fannie Mae and Freddie Mac had argued that allowing them to take on more debt would help pump cash into the struggling mortgage market.

The announcement by the Office of Federal Housing Enterprise Oversight came at the end of a week of speculation that the regulators would allow the government-sponsored companies a wider investment berth. The companies' shares had soared on Wall Street in an otherwise skidding market.

Fannie Mae to the Rescue?

In an interview on CNBC Thursday, Fannie Mae CEO Daniel Mudd said Fannie Mae is seeking regulatory approval to increase its lending limits in order to put more liquidity back in the mortgage market, which has been hurt by growing subprime lending troubles and tightening credit.

“We’re ready to start investing now," Mudd said. A lot of "people and institutions in the middle of the system" could benefit from the increased liquidity, he added, including subprime borrowers.

"The marketplace should have confidence that Enterprise securities are trading efficiently," said OFHEO director James Lockhart, in a prepared statement.

The Enterprises will remain active market participants and OFHEO will continue to closely monitor both the markets and the Enterprises' safety and soundness.