GSE Problems Far From Over

It could be "several years" before the scandal-wracked government-chartered housing enterprises are out of the woods, their safety-and-soundness regulator has told Congress.Even Freddie Mac, which had been thought to have turned the corner on its accounting problems, is still in the doghouse with the Office of Federal Housing Enterprise Oversight, said acting Director James Lockhart, who has been on the job just over a month. "Both companies are several years away from having adequate internal controls" in place, he told the House Financial Services subcommittee on capital markets, insurance, and government-sponsored enterprises on June 6. Mr. Lockhart said the sanctions in place on Fannie Mae in its $400 million settlement with OFHEO, including the freeze placed on the company's portfolio mortgage assets, can be lifted at the sole discretion of the director. But he added that it's "hard to see their total removal for several years." And he cautioned lawmakers that a similar limit on Freddie Mac is not out of the question. That company is "at least two years away from having acceptable accounting and risk management" in place, he told the panel. Subcommittee Chairman Richard Baker, R-La., agreed, saying "we have a long road" to travel before the two GSEs are shipshape. But the ranking minority member, Rep. Barney Frank, D-Mass., reminded the panel that while Fannie and Freddie may be wounded, they are still fulfilling their housing mission.