Raines: Freddie Fallout Bumped Rates

The fallout from Freddie Mac's accounting scandal has pushed up mortgage rates and will crimp originations this year, according to Fannie Mae chief executive Franklin Raines.In a wide-ranging news conference, Mr. Raines said the restatement of Freddie Mac's earnings and the investigation into its accounting activities have injected uncertainty into the capital markets and pushed up rates. He pointed out that Fannie Mae economists just reduced their forecast for mortgage originations this year by $300 billion, to $3.4 trillion. Meanwhile, the markets are waiting for the Bush administration's response to Freddie Mac's "management failure," he said, which is adding to the uncertainty. Under questioning, he admitted that the Office of Federal Housing Enterprise Oversight's reputation has been "damaged" by the events at Freddie Mac. And he believes Congress wants to strengthen safety-and-soundness regulation of Freddie Mac and Fannie Mae, but not change their charters or mission. The Fannie Mae chairman and CEO complained, however, that the Freddie Mac news has inflicted "collateral damage" on his company. "Although the impact on us has not been as strong as it has been on Freddie Mac, it has been far stronger than is warranted by the facts," Mr. Raines said at the July 30 news conference. Fannie Mae can be found online at http://www.fanniemae.com.