Analyst Sees GSE, FHA Move on Jumbos

Congress is considering legislation to raise the loan limits for Fannie Mae, Freddie Mac, and the Federal Housing Administration, which could give the government-sponsored enterprises and the FHA a large share of the jumbo mortgage market, according to banking expert Karen Shaw Petrou."Atop this is talk from Treasury that the GSEs could also go beyond their current charter to rely on self-insurance for high-risk mortgages," she told a group of general counsels from large banks. Treasury Secretary Henry Paulson recently suggested that the mortgage insurance requirements on Fannie Mae and Freddie Mac could be relaxed to facilitate refinancings of subprime borrowers with little or no equity in their homes. "I think lenders and securitizers are looking at legislation that would put the federal government -- directly through the FHA and indirectly through the GSEs -- into every segment of the mortgage market from the highest-risk subprime loans to jumbo, prime-quality loans," she said. Ms. Petrou is the managing partner of Federal Financial Analytics in Washington.