NEW YORK (Reuters) - Countrywide Financial Corp's CFC.N chief executive called on the U.S. Congress to temporarily raise the maximum size of mortgages that Fannie Mae FNM.N, Freddie Mac FRE.N and the Federal Housing Administration may buy or insure by 50 percent to $625,000.
In an opinion piece in the Wall Street Journal on Wednesday, Chief Executive Angelo Mozilo, whose company is the largest U.S. mortgage lender, said the increase from $417,000 should be implemented for up to a year.
He said this would go a long way toward alleviating a nationwide housing crunch, which analysts expect to pinch borrowers and lenders throughout 2008 and probably beyond.
“It should be enacted as part of a broader package of reforms to ensure that these linchpins of our mortgage system can aggressively support the housing market in a time of need, and that the appropriate controls and oversight are in place to protect taxpayers,” Mozilo wrote.
Mozilo had previously called for the cap to be raised to as much as $850,000.
Any increase in the cap should benefit Countrywide, which now primarily makes home loans that Fannie Mae and Freddie Mac can buy.
The Calabasas, California-based company shifted away from riskier loans after soaring delinquencies and defaults contributed to a $1.2 billion third-quarter loss, and expected job cuts of 10,000 to 12,000.
Fannie Mae and Freddie Mac have in the last three weeks both cut their dividends and announced large preferred-stock offerings to help shore up capital.
Lenders such as Countrywide might be forced to make fewer home loans if the mortgage financiers are unable to buy enough of them.
On Nov. 27, the Office of Housing and Enterprise Oversight, which regulates Fannie Mae and Freddie Mac, said that in 2008 it would maintain the “conforming” loan limit at $417,000 for a third straight year.
Countrywide on Oct. 23 offered to refinance or modify up to $16 billion of adjustable-rate mortgages through 2008 to help 82,000 borrowers who face higher payments stay in their homes.
Shares of Countrywide closed Tuesday at $10. They have fallen 76 percent this year.
Reporting by Jonathan Stempel; Editing by Lisa Von Ahn
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