Fannie Mae and Freddie Mac: Proposals to Regulate Their Mortgage Portfolio Size in the 110th Congress Page: 4 of 13
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Fannie Mae and Freddie Mac: Proposals to
Regulate Their Mortgage Portfolio Size
in the 110th Congress
Rising interest rates and interest rate resets on subprime adjustable rate
mortgages combined with stagnant or falling home prices threaten increasing
numbers of homeowners with foreclosure. Members of Congress have responded to
this situation by proposing legislation that would increase the mortgage portfolios of
Fannie Mae and Freddie Mac, two congressionally chartered, stockholder-owned
businesses.1 The intent is to help these homeowners by making available affordable
refinancing and, in some proposed legislation, to increase the conforming loan limit
(the size of mortgages that the GSEs are authorized to purchase).
Congressional - as opposed to regulatory - action to increase GSE portfolios
is being considered because accounting and management problems at the GSEs led
the Office of Federal Housing Enterprise Oversight (OFHEO) to limit their mortgage
portfolios. The formula for the conforming loan limit (presently $417,000) is
established in their charters and so legislation would be required to change it. The
GSEs, which are prohibited by law from directly making mortgage loans to
homeowners, purchase mortgages from the original lenders, which can make more
loans. The intent of the bills is to encourage GSEs to purchase mortgages that
refinance homeowners out of subprime mortgages. The GSEs would assume the risk
of default by the homeowner. Table 1 summarizes the provisions of the bills.
1 Rep. Melissa L. Bean introduced H.R. 3777, the Protecting Access to Safe Mortgages Act,
on October 9, 2007. Rep. Barney Frank introduced H.R. 3838, To temporarily increase the
portfolio caps applicable to Freddie Mac and Fannie Mae, to provide the necessary financing
to curb foreclosures by facilitating the refinancing of at-risk subprime borrowers into safe,
affordable loans, and for other purposes, on October 16, 2007. Sen. Charles E. Schumer
introduced S. 2036, the Protecting Access to Safe Mortgages Act, on September 9, 2007.
Sen. Schumer introduce S. 2169, Promoting Refinancing Opportunities for Mortgages
Impacted by the Subprime Emergency Act of 2007, on October 16, 2007. Senator Schumer
introduced S. 2346, also called Promoting Refinancing Opportunities for Mortgages
Impacted by the Subprime Emergency Act of 2007, on November 14, 2007. It was placed
on the Senate Legislative Calendar under General Orders. Unless stated otherwise, all bills
in this report were introduced in the 1 10*t Congress. Fannie Mae and Freddie Mac are
known as government-sponsored enterprises (GSEs). This report will refer to them as
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Fannie Mae and Freddie Mac: Proposals to Regulate Their Mortgage Portfolio Size in the 110th Congress, report, March 4, 2008; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc807922/m1/4/: accessed March 18, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.