Proposed federal legislation strengthening oversight of Fannie Mae and Freddie Mac could reduce mortgage costs for 397,000 U.S. homeowners -- including many in California -- by as much as $750 million a year, the California Assn. of Mortgage Brokers said.
The bill, which passed the House Financial Services Committee by a 65-5 vote in May, would also cut mortgage rates enough to enable about 245,000 households to buy homes at the median price in their communities, the Folsom, Calif.-based association said in a report Monday.
An amendment in the bill would help home buyers in high-cost housing markets by raising the limit on mortgages that Fannie Mae and Freddie Mac would be allowed to purchase to the median home price in those markets from the current maximum of $359,650. The companies have a combined mortgage portfolio of about $1.47 trillion.
"This is a sop to not just parts of the housing industry like Realtors, mortgage bankers, mortgage brokers and home builders, but to Fannie and Freddie," said Bert Ely, a bank and regulation consultant in Alexandria, Va., who runs Ely & Co. and has called for restrictions on the size of Fannie Mae and Freddie Mac. "The amendment increases the amount of mortgages" the two government-chartered companies could buy.
Fannie Mae and Freddie Mac would be able to purchase mortgages valued as high as $607,000 in San Francisco, $485,000 in Los Angeles, $394,000 in New York and $363,000 in Boston, the California mortgage brokers said.
"The $100 to $200 monthly savings in mortgage costs would be a huge help to people who are really tight financially in high-cost areas," said Jonathan Barnato, government affairs director for the mortgage group.
Fannie Mae and Freddie Mac are able to borrow more cheaply than rival mortgage finance companies because of their federal charters. The lower borrowing costs help reduce mortgage rates. The rate on "conforming loans" eligible for purchase by Fannie Mae and Freddie Mac is often at least 0.25 percentage point lower than that on ineligible "jumbo loans" that exceed the conforming loan limit.
The Senate Banking Committee on July 28 approved Republican-sponsored legislation that would tighten federal oversight of Fannie Mae and Freddie Mac and compel them to sell portfolio assets unrelated to their mortgage bond business.
The legislation will compete with the House bill, which has stalled because of opposition from some Republicans to a requirement that the two companies channel 5% of their after-tax profit to a fund for promotion of affordable housing.