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Limits on Fannie, Freddie portfolios lifted
Washington, D.C. -- Fannie Mae and Freddie Mac will be allowed to expand their roles in the turbulent mortgage market even as worsening conditions in the housing sector punish the two.
Fannie, the largest buyer and backer of U.S. home loans, said Wednesday that it lost nearly $3.6 billion in the fourth quarter of 2007 amid mounting home-loan delinquencies and soured bets on interest rates. Freddie is expected today to report a $1.5 billion fourth-quarter loss.
Under a previous agreement with federal regulators, the timely filing of Fannie's and Freddie's financial results triggers the removal of an investment-portfolio cap placed in the aftermath of multibillion-dollar accounting scandals at the government-sponsored companies.
Analysts said the impact will be limited, however, because of the large cash cushion that Fannie and No. 2 mortgage financer Freddie must maintain as a reserve against risk. Tightness in credit markets makes it expensive for Fannie and Freddie to marshal additional funds.
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