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November 8, 2007

Fed Chairman Proposes New Mortgage Guarantees

As Congress and the financial services industry struggle to cope with rising mortgage defaults and a deepening housing slump, Federal Reserve Chairman Ben Bernanke Wednesday proposed that the federal government guarantee so-called “jumbo” home loans worth up to $1 million.

Bernanke proposed that so-called “government sponsored entities” like Freddie Mac and Fannie Mae pay mortgage insurance fees to the federal government. These GSEs would then guarantee loans that are larger than the current $417,000 limit on so-called “conforming” mortgages

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