Fan­nie Mae asks to buy more mort­gages

The Washington Times Weekly - - National - By Pa­trice Hill

Fan­nie Mae gave hope to gloomy mar­kets on Aug. 6 by ask­ing reg­u­la­tors for per­mis­sion to pur­chase more mort­gages from strug­gling lenders — a move that would help to ease the wors­en­ing Wall Street credit crunch.

The pos­si­bil­ity of a res­cue from Wash­ing­ton came as Amer­i­can Home Mort­gage In­vest­ment Corp. filed for bank­ruptcy in Delaware, be­com­ing the sec­ond-largest mort­gage lender to go un­der this year.

In a sign of the in­creas­ing sever­ity of the credit con­ta­gion, wor­ries about the sol­vency of Coun­try­wide Fi­nan­cial Corp., the big­gest U.S. mort­gage lender, prompted it to dis­close in a fil­ing that it has ac­cess to $186.5 bil­lion to cush­ion it­self against a credit crunch that has pushed at least a dozen com­peti­tors into bank­ruptcy.

Fan­nie Mae’s move raised the pos­si­bil­ity that the gi­ant mort­gage com­pany will step in the void left by slump­ing de­mand for mort­gage se­cu­ri­ties on Wall Street. Fan­nie Mae of­fi­cials ap­proached the Of­fice of Fed­eral Hous­ing En­ter­prise Over­sight (OFHEO) in the past few days, seek­ing to have re­stric­tions lifted so it can hold more home-loan as­sets in its port­fo­lio, said an of­fi­cial on the con­di­tion of anonymity be­cause the move was con­fi­den­tial.

Fan­nie Mae and smaller ri­val Fred­die Mac could pick up the slack left by Wells Fargo & Co., Wa­chovia Corp. and other lenders who re­cently have an­nounced ma­jor cut­backs in lend­ing to bor­row­ers with lower subprime and “al­ter­na­tiveA” credit rat­ings.

IndyMac Chief Ex­ec­u­tive Of­fi­cer Michael Perry said two weeks ago he asked the Wash­ing­ton-based com­pa­nies to help.

“There is sig­nif­i­cant pres­sure com­ing from lenders to the reg­u­la­tors ask­ing for steps like that,” said Howard Glaser, a mort­gage con­sul­tant. “Lenders them­selves are re­quest­ing OFHEO al­low Fan­nie Mae and Fred­die Mac to step in.”

Un­der the hous­ing agency’s guide­lines, Fan­nie Mae must limit its port­fo­lio to $727.2 bil­lion, its level as of Dec. 31, 2005. Fred­die Mac must re­strict an­nual growth of its $712.1 bil­lion port­fo­lio to 2 per­cent.

“We are anx­ious to have a dis­cus­sion with our reg­u­la­tor on how we can bring liq­uid­ity to the mar­ket at this time,” Fred­die Mac spokes­woman Sharon McHale said. “We have not be­gun to have those dis­cus­sions.”

Mean­while, Amer­i­can Home Mort­gage sought fed­eral court pro­tec­tion from cred­i­tors, say­ing it had as­sets of more than $20.6 bil­lion and debt of more than $19.3 bil­lion owed to more than 100,000 cred­i­tors. The fil­ing comes af­ter the com­pany an­nounced on Aug. 2 that it would halt op­er­a­tions and slash its staff.

This ar­ti­cle is based in part on wire ser­vice re­ports.

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