Fannie Mae Sees Market Share Dip in 2004

Just as Fannie Mae announced a drop in its share of the mortgage-related securities market, Federal Reserve Chairman Alan Greenspan renewed calls for limits on the mortgage giant's huge portfolio of mortgage assets.

Fannie Mae's market share dropped from 45 percent in 2003 to 29 percent in 2004, according to its filing with the Securities and Exchange Commission.

The company said in its filing that the drop was due to the fact that more consumers are turning to adjustable-rate mortgages, the Washington Post reported. Fannie typically does not buy adjustable-rate loans from retail mortgage lenders, so housing experts agreed with Fannie's assessment, but only up to a point.

Fannie's business is also shrinking because it is limiting its investments so it can save more money, the experts said. Its federal regulator, the Office of Federal Housing Enterprise Oversight, has ordered the government-chartered company to increase the amount of capital it has in reserve.

In a speech last week, Greenspan discussed the dangers of the multibillion-dollar holdings of Fannie Mae and Freddie Mac, the second largest home mortgage buyer after Fannie Mae. Concerns about potential market disruptions posed by the two mortgage giants "will remain valid until the vast leveraged portfolios of mortgage assets held by Fannie and Freddie are reduced and the associated concentrations of market risk and risk-management responsibilities are correspondingly diminished," Greenspan said.

After the speech, Greenspan said the two mortgage companies "should hold only the minimum level of assets needed to accomplish the primary missions mandated by their charter," the Associated Press reported.

Meanwhile, Fannie Mae has announced that it will buy more 40-year mortgages, which should prompt lenders to offer them more often, MarketWatch reported. Thomas Lund, Fannie's acting executive vice president of single-family businesses, told executives at a mortgage banking conference last week that the company would be making the 40-year mortgage “a standard product.”

The company reported that its gross mortgage portfolio totaled $864.6 billion as of March 31, compared with $880.9 billion on March 31, 2004.

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