By Al Yoon
NEW YORK, Feb 17 (Reuters) – The federal regulator of Fannie Mae and Freddie Mac on Wednesday proposed an overhaul of government rules on how the mortgage funding giants serve low-income homeowners while limiting their risks.
The Federal Housing Finance Agency wants new goals that would target borrowers with lower incomes than in the past — including families with incomes at or below 80 percent of their area’s median, down from 100 percent — while giving Fannie Mae and Freddie Mac more flexibility in measuring success.
In a twist from past practices, the proposals would prohibit Fannie Mae and Freddie Mac, the two biggest sources of U.S. housing finance, from buying home equity loans and Wall Street’s mortgage securities to satisfy the goals.
Analysts said the proposals are likely aimed to balance the companies’ support of the housing market while preventing them from making hazardous expansions to fulfill requirements.
Both companies are still reeling from purchases of some of the riskiest loans during the housing boom, which have caused billions of dollars in losses that are now being subsidized by the U.S. Treasury.