Daily News and Information for the Mortgage Loan Originator
Fed Chairman Says Fannie and Freddie in No Danger of Failing
Wednesday, July 16, 2008
- By Staff Writer, Originator Times
WASHINGTON, D.C. - Federal Reserve Chairman Ben Bernanke stood before the House Financial Services Committee today and assured Congress that Fannie Mae and Freddie Mac are in "no danger of failing" and that they are “adequately capitalized.”
Bernanke said that a lack of investor confidence in the housing market led to the GSE’s inability to raise capital which caused investors to get the jitters, stock prices to plunge, and the Fed to step in.
The intention of the Fed’s plan to rescue Fannie and Freddie, if necessary, was merely meant to send a message to the financial community, the industry, and consumers – assuring us all that the government would see to it that Fannie and Freddie would not fail…because they cannot fail. Fannie and Freddie own or back more than half the mortgage debt in the U.S. which amounts to more than $5 trillion. Their survival is crucial to not only the U.S. housing market, but to the nation’s overall economy.
The emergency rescue plan involves 1.) the Administration asking Congress to pass legislation that would extend lines of credit on a temporary basis over the current billion $2.25 limit from the Treasury to Fannie and Freddie; 2.) giving the Treasury the option to buy equity in Fannie and Freddie; and 3.) granting the Federal Reserve Bank of New York the authority to lend additional funds to the GSEs.
Both Fannie and Freddie were quick to say the plans are just a precaution. “We continue to hold more than adequate capital reserves and maintain access to liquidity from the capital markets,” said Daniel H. Mudd, President and CEO of Fannie Mae. “Given the market turmoil, having options to access provisional sources of liquidity if needed will help to strengthen overall confidence in the market.”
Richard F. Syron, Chairman and CEO of Freddie Mac shared Mudd’s sentiment, “The company (Freddie Mac) is adequately capitalized, has a large liquidity portfolio and access to the world's debt markets. The company's capital and liquidity resources will enable it to continue to serve its public mission as it has always done.”
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Articles :
Fannie and Freddie in Peril The industry, along with investors, was in a state of panic on Friday afternoon with news that giants Fannie Mae and Freddie Mac were on the brink of disaster. Both Fannie and Freddie stocks initially took huge hits on Friday, falling by 47% and 22% respectively, after rumors of a bailout hit the street.
MBA’s Quinn Reacts to Treasury and Fed Announcement on GSEs Kieran P. Quinn, Chairman of the Mortgage Bankers Association, applauded the actions outlined by the United States Department of Treasury and the Federal Reserve Board regarding Fannie Mae and Freddie Mac.
Freddie Mac Becomes an SEC Registrant Freddie Mac has become a registrant with the SEC and reiterated that it has committed to its regulator, the OFHEO, to raise $5.5 billion of new core capital through one or more offerings.
Quinn Calls on Congress to Pass Housing Bill MBA Chairman Kieran P. Quinn sent the attached letter to the Majority and Republican leaders of the House and Senate calling for Congress to finish the omnibus housing legislation and send it to the President before August.
Fannie Mae to Increase Cash Incentives As part of its ongoing efforts to support borrowers facing foreclosure and promote responsible servicing practices, Fannie Mae will increase the cash incentives paid to servicers that pursue alternatives to foreclosure.
Losses Mount at Freddie Mac Freddie Mac reported a net loss of $821 million for the quarter ended June 30, 2008 - a marked increase from when the company reported a net loss of $151 million loss for the first quarter of 2008.
How Will Originations be Impacted by Fannie, Freddie Turmoil? Fannie Mae and Freddie Mac are now under control of the federal government. The take over is an attempt to stabilize the housing market and the U.S. economy. The result may be just the opposite. Either way, the move has enormous implications for the livelihood of mortgage originators.
