A Reuters report cited two sources stating that Federal Home Loan Mortgage Corp (OTCBB:FMCC) and Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) regulator is planning to ease the annual limits placed on the mortgage business. The move is aimed to contain lending slowdown, said the sources. The two government sponsored entities (GSEs) are about to touch their $30 billion limit in multifamily business in their third quarter.
The market is abuzz that The Federal Housing Finance Agency (FHFA) is in process to ease the said cap that it had guided in January. If these limits are not freed, then both Federal Home Loan Mortgage Corp (OTCBB:FMCC) and Fannie Mae might have to put a hold on their business in the second part of the year. Eventually, this may translate into higher costs to borrowers and scarcity of multifamily credit. With the two housing companies nearing their limits, has forced them to demand wider interest rate spreads, which indicates an effort to reduce their business growth.
In view of the emerging challenges, the regulator has reviewed plans to soften its guidelines on the multifamily credit. As per the sources, the regulator might extend the cap by %5 billion for each company. As the same time, the regulator is also looking at the option to broaden the criteria, which will make more mortgages exempt from the set limits. However, the representative of FHFA has refused to comment on the progress.
It is noteworthy that the multifamily mortgage business of Federal Home Loan Mortgage Corp (OTCBB:FMCC) and Fannie Mae grew four-fold over the last one year, driven by the low-interest rates and higher demand for rental apartments. Federal Home Loan Mortgage Corp (OTCBB:FMCC) extended finance to the tune of $10 billion towards multifamily loans in the first quarter itself. Given the achievement, it makes sense for the regulator to help accelerate the business and not let it take a pause.
The stock of Federal Home Loan Mortgage Corp (OTCBB:FMCC) settled 1.08% higher at $2.82 as 2.42 million shares traded hands.