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Bernanke-Govt could relieve GSEs of jumbo mortgage risk

Thu Nov 8, 2007 11:23am EST

WASHINGTON, Nov 8 (Reuters) - Federal Reserve chairman Ben Bernanke said on Thursday the federal government could relieve some of the credit risk of jumbo mortgage purchases from Fannie Mae and Freddie Mac to preserve their safety and soundness.

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Answering questions before Congress' Joint Economic Committee, Bernanke said that if the two housing finance giants are allowed to temporarily invest in jumbo mortgages above their $417,000 limit, it was imporrtant not to increase their credit risks.

"One possibility would be if the federal government were to be willing to act as guarantor...to take away the credit risk from GSEs, so that they could process these jumbo loans and sell them to the secondary market and that would be of some assistance to the mortgage market. (Reporting by David Lawder, Editing by Chizu Nomiyama,)

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