WASHINGTON The U.S. Congress gave a new regulator for Fannie Mae and Freddie Mac stronger oversight powers too late to help steer the companies away from a government takeover, the chief regulator for the mortgage finance companies said on Tuesday.
"I am very grateful that Congress granted those authorities to FHFA, but regrettably they arrived too late to establish a strong capital regime in advance of this credit cycle," James Lockhart, the director of the Federal Housing Finance Agency told the Senate Banking Committee, according to prepared testimony obtained by Reuters.
Early this month, the Treasury Department orchestrated a nationalization of Fannie Mae and Freddie Mac in order to stabilize the companies that had lost the confidence of investors.
In his prepared remarks, Lockhart said that his confidence in the companies was shaken during a close review of their health during the summer months.
"It became apparent during this intense supervisory review that market conditions were deteriorating more quickly than the companies had anticipated and more quickly than they could respond by adjusting their models and forecasts," Lockhart said.
The regulator faulted the companies for bulking up their investments in high-risk mortgages in 2006 and 2007 as the national housing market slipped.
(Written by Patrick Rucker; Editing by Walker Simon)