OFHEO Won't Provide 'Major' Cap Increases

The Office of Federal Housing Enterprise Oversight says it will allow Fannie Mae and Freddie Mac added "flexibility" in managing their mortgage portfolios to assist troubled subprime borrowers, but that it would not be "prudent" to make major changes because the companies are not done fixing their accounting systems.OFHEO's reluctance to increase the government-sponsored enterprises' ability to portfolio loans in a greater amount met with immediate criticism from some top elected officials. OFHEO's added flexibility would allow the GSEs to increase their on-balance-sheet holdings by about 2% -- but over a shorter time frame. Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., called the 2% figure "pretty timid," saying that at least 5% is needed. Sen. Charles E. Schumer, D-N.Y., wants a 10% increase. OFHEO said its changes will allow Fannie and Freddie "to purchase or securitize, over the next six months, up to $20 billion or more of subprime mortgages."