Major Updates on Mortgage Market’s Future from FHFA’s Watt

Melvin L. Watt, Director of the Federal Housing Finance
Agency (FHFA) told the Senate Banking Committee today that Freddie Mac and
Fannie Mae (the GSEs) will soon announce they will begin purchasing loans with
downpayments of 3 or 5 percent, similar to those offered by FHA.  Watt made the announcement in remarks prepared
to update to the Committee on the GSEs and the Federal Home Loan Banks for
which FHFA is regulator.  The agency also
serves as conservator of the two government sponsored enterprises.   

Watt summarized the financial performance of the GSEs as
significantly improved
since the conservatorship began in 2008.  While both entities have posted profits every
quarter since the beginning of 2012 he said that some of the increased
performance relates to one-time or transitory items, such as the reversal of each
GSE’s deferred tax asset valuation allowance, legal settlements, and the
release of loss reserves associated
with rising house prices. Other portions of the improvement are attributable to such factors as strengthened underwriting
practices and increased guarantee fees.


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