Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) has been reported to has been released of a loan cap along with Federal Home Loan Mortgage Corp (OTCBB:FMCC), from the FHFA. The cap limits the amount the company can issue in housing loans to $30 billion a year. As per recent reports, the cap has been removed to speed up apartment construction processes throughout the country.
The cap limit had been in place since the start of the year, but the government officials now feel that its time the limits were removed. The move comes after analysts pointed out that the current cap would result in the two companies would stop making loans by the end of 2Q2015.
The end result would have been less credit in the multifamily sector and higher costs to borrowers. To stop this from happening and prolong its business plan with the cap would mean reducing the number of issued loans. As per the details of the reports, the government is considering options, which include adding $10 billion to the cap. Additionally, there have been talks to exempt additional mortgages from the limit.
The Multi-family housing plans have been the one of the most profitable parts of the two companies. The business has already registered a 400% increase from last year. The main selling points have been low interest rates and increased demand for rental housing. Unfortunately, the growth has been unable to impress investors, as Freddie Mac posted less than expected earnings. The EPS stood at $0.16, as compared to expectations of $0.63. However, the net-income showed an increase of $227 million, as compared to the previous quarter. The losses in the current quarter stood at $2.4 billion, which were lower than $3.4 billion last quarter, but still pretty high. Consequently, the two stocks suffered, losing the faith of investors.