THE regulator of Fannie Mae and Freddie Mac laid out plans for the government-run companies Tuesday that could make it easier for Americans to obtain mortgages, marking a sharp departure from a predecessor who wanted to aggressively shrink their role in the housing finance market.

    Federal Housing Finance Agency (FHFA) director Mel Watt, in his first public speech since taking office in early January, said he would hold off on a proposed reduction in the size of loans the firms can buy, and added he was jettisoning plans to reduce the financing they provide for apartment building loans.

    He also said the two companies, which own or guarantee about 60 percent of all U.S. home loans, would ease standards that govern when banks must buy back faulty loans from them, which could also help open the credit taps.

    “I don’t think it’s FHFA’s role to contract the footprint of Fannie and Freddie,” Watt said at an event sponsored by the Brookings Institution. “Our overriding objective is to ensure that there is broad liquidity in the housing finance market and to do so in a way that is safe and sound.”

    The Senate Banking Committee will consider a bill Thursday to replace Fannie Mae and Freddie Mac with an industry-financed government mortgage reinsurer, but the likelihood of any legislation becoming law soon is slim, leaving the regulator with power to direct the firms.

    Watt said he did not see it as his role to weigh in on the debate. Both Watt’s predecessor, Edward DeMarco, and the Obama administration favored cutting the size of so-called conforming loans as a way to make room for more private capital. But housing industry groups had warned the step could undercut a market that already appears to be flagging.

    Federal Reserve Chair Janet Yellen said last week there was a risk a protracted housing slowdown could undermine hopes for stronger economic growth this year.

    “FHFA will not use its authority as conservator to reduce current loan limits,” Watt said. “This decision is motivated by concerns about how such a reduction could adversely impact the health of the current housing finance market.”

    Some investors saw the shift as making it more likely the bailed-out companies, which lawmakers and the Obama administration want to shut down eventually, would ultimately survive. Their common stock shot up more than 11 percent in early trading to around US$4.70 a share. If the companies are wound down, the stock would likely be worthless.

    Investors also seemed heartened by Watt’s decision to not force Fannie Mae and Freddie Mac to pull back support for multi-family housing. The PHLX Housing Index of homebuilders ticked up 0.7 percent, with several major builders, including PulteGroup, Lennar and KB Home all rallying.

    (SD-Agencies)