WASHINGTON, July 17 U.S. housing finance
companies Fannie Mae and Freddie Mac are making riskier deals as
they increasingly purchase mortgages from smaller lenders, a
federal watchdog said on Thursday.
The government-owned companies do not lend money directly,
but underpin the U.S. housing market by guaranteeing most new
mortgages in the country.
The Federal Housing Finance Agency Office of Inspector
General said in a report that the purchases from smaller lenders
raises the exposure of the two companies.
"Smaller and non-bank lenders may have relatively limited
financial capacity," the watchdog said. "The enterprises face an
increase in the risk that those counterparties could default on
their financial obligations."
Fannie Mae and Freddie Mac, which were
seized by the U.S. government in 2008 during a housing market
implosion, purchase loans from lenders and package them into
securities that are then sold to investors.
In the past, the two companies bought most of their loans
from the country's largest banks. Small lenders generally dealt
with larger banks, who in turn sold them to Fannie and Freddie.
However, tighter regulations have made big banks such as
Bank of America Corp and Wells Fargo & Co reticent to buy loans
from other lenders, so more small banks and non-bank enterprises
now sell directly to Fannie and Freddie.
Freddie Mac's top five mortgage sellers provided 70 percent
of its loans in early 2011, but only 44 percent in late 2013,
according to the report.
(Reporting by Jason Lange. Editing by Andre Grenon)