The Office of Federal Housing Enterprise Oversight announced Wednesday that it has cut the government-sponsored mortgage investors’ surplus capital requirement to 20 percent from 30 percent for Fannie Mae and Freddie Mac.

The OFHEO estimates that this reduction, in combination with the release of portfolio caps announced last month, should:

1. Provide up to $200 billion of immediate liquidity to the mortgage-backed securities market
2. Allow Fannie Mae and Freddie Mac to purchase or guarantee about $2 trillion in mortgages this year

This could be significant to our local real estate market.

Credit is harder to come by because of more stringent lending practices in the wake of the sub-prime mortgage melt down.  Fannie and Freddie will have more liquid capital to purchase mortgages, hopefully resulting in more credit being offered to local home buyers.

All of these changes are an effort to add liquidity to the mortgage market while maintaining both investor and home buyer confidence in the system. Both agencies have seen significant changes in the last few months including the clearance to purchase larger loans (jumbo) up to $729,250 in some areas.

These adjustments are designed to help stimulate home sales and keep the economy moving forward