First Words From New Fannie, Freddie Chiefs
In their first public comments since the seizure of Fannie Mae and Freddie Mac, the companies' government-appointed chief executives signaled today that they are initiating wide-ranging reviews of how the firms do business, with the main goal of helping homeowners avoid foreclosure.
The companies have already taken steps to reduce foreclosure and support the mortgage market, but "these actions clearly are not enough," said Herb Allison, the new Fannie Mae chief executive, testifying today before the House Financial Services committee.
"We are looking at every aspect of our business with the goal of improving our funding, pricing, trading, risk management and foreclosure prevention efforts," Allison said.
"New initiatives that take advantage of Fannie Mae's breadth and size may entail risks and costs in the short [term] but will have long-run benefits to the country and Fannie Mae by helping staunch the flow of foreclosures, encourage homeowners to ride out the cycle and help put a floor under home prices," he added.
Allison said Fannie Mae is reviewing underwriting and pricing standards, buying more mortgage-backed securities and developing new plans to support low-income housing.
David Moffett, the new chief executive of Freddie Mac, focused nearly all his prepared remarks on affordable housing.
Moffett said Freddie Mac is "actively engaged" in reducing foreclosures, modifying loans and offering financial incentives to pay lenders who help people avoid foreclosure.
He said 124,000 people with Freddie Mac-guaranteed loans are delinquent; about one-third of those have been worked out and another one-third should be worked out by the end of the year.
"Workouts are critically important but they will not help stabilize the market unless borrowers are able to sustain homeowners going forward," Moffett said. "As a general rule, we direct services to underwrite each modification based on the borrowers actual circumstances at the time."
-- Zachary A. Goldfarb
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