The Office of Federal Housing Enterprise Oversight OFHEO, Fannie Mae and Freddie Mac have launched a major initiative intended to increase liquidity in support of the U.S. mortgage market. The initiative is expected to provide up to $200 billion of immediate liquidity to the mortgage-backed securities market.
To support growth and further restore market liquidity, OFHEO will begin to permit a significant portion of the government-sponsored enterprises' (GSEs) 30% OFHEO-directed capital surplus to be invested in mortgages and mortgage-backed securities.
As a key part of this initiative, both Fannie and Freddie announced that they will begin the process to raise significant capital. Both companies also said they would maintain overall capital levels well in excess of requirements while the mortgage market recovers in order to ensure market confidence and fulfill their public mission.
OFHEO estimates that Fannie Mae's and Freddie Mac's existing capabilities, combined with this new initiative and the release of the portfolio caps announced in February, should allow the GSEs to purchase or guarantee about $2 trillion in mortgages this year. This capacity is expected to permit them to do more in the jumbo temporary conforming market, subprime refinancing and loan modifications areas.
In addition, according to OFHEO, Fannie Mae is in full compliance with its Consent Order, and Freddie Mac has one remaining requirement relating to the separation of the chairman and CEO positions. OFHEO expects to lift these Consent Orders in the near term.