Transcripts

Fannie Mae & Freddie Mac 's Plan To Ease The Housing Crisis

JEFF YASTINE: Another sign of weakness in the housing market, the National Association of Realtors said pending home sales in December fell to the second lowest level on record. Some lawmakers now want key mortgage players Fannie Mae and Freddie Mac to help shore things up. But as Stephanie Dhue explains, on Capitol Hill today, there is another question: who will keep tabs on Fannie and Freddie?

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Lawmakers want Fannie Mae and Freddie Mac to be able to buy so-called jumbo mortgages of up to $735,000, a nearly 75 percent increase over current limits. Senate Banking Committee Chairman Chris Dodd says that change is important given the housing crisis.

SEN. CHRIS DODD (D) CONNECTICUT: We've got a major, major problem in our country and it's global, in effect, and we've got to act, I hear, and one of the things you've got to do is not just stimulate spending, but you need to address the underlying issue and that's housing and foreclosures. And by getting more liquidity in the market by raising these loan limits, I think helps in that regard.

DHUE: Fannie Mae and Freddie Mac buy home loans from banks and other lenders, then bundle them into securities. Together they now hold or guarantee nearly $5 trillion in mortgage debt. Republicans on the banking committee are leery about increasing that amount. Senator Mel Martinez says lifting the loan limits may prove unwise over the long term.

SEN. MEL MARTINEZ (R) FLORIDA: How is it that we are to feel more comfortable and more confident that the taxpayers of America are not at greater risk by increasing the conforming loan limits of Fannie and Freddie without a corresponding stronger regulator?

DHUE: Since the 2003 accounting scandals at Freddie Mac and Fannie Mae, lawmakers have been battling over just how to strengthen their regulator. Now increases in the loan limits have given the issue more urgency. James Lockhart heads the office that now the regulates Fannie Mae and Freddie Mac. He is urging Congress to beef it up.

JAMES LOCKHART, DIR, OFFICE OF HOUSING ENTERPRISE OVERSIGHT: I think it's critical that we have all the powers of a strong regulator not only to make sure they do this properly but to make sure everybody else believes that they can do it properly.

DHUE: Lockhart says it will take one to three months after legislation is passed before Fannie and Freddie can begin to securitize jumbo loans. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.