The Reagan administration has decided to oppose a bid by the Federal Home Loan Mortgage Corp. to enter the private sector, according to David O. Maxwell, chairman of the rival Federal National Mortgage Association, speaking to stockholders at the association's annual meeting yesterday.
Both organizations buy blocks of residential mortgages from banks and savings institutions, making more funds available for new mortgage lending. But the Federal Home Loan Mortgage Corp., known as Freddie Mac, wants to sever its ties with the federal government and sell stock to the public, as the Federal National Mortgage Association, known as Fannie Mae, does now.
The administration previously had stated its support in principle for the move, but the Office of Management and Budget apparently is opposed to legislation now before Congress that would make Freddie Mac independent, according to industry sources.
Lawrence A. Kudlow, assistant director for economic policy of OMB, told securities analysts at a private meeting earlier this month that the administration objected to independence for Freddie Mac because that would mean more federal participation in the credit markets, which acts to keep interest rates up, according to analysts who heard Kudlow's remarks. He could not be reached for comment yesterday.
The bill before a House committee would give Freddie Mac, now an arm of the Federal Home Loan Bank Board, parity with Fannie Mae, once a government agency but now a publicly traded corporation with a line of credit to the Treasury. The proposed legislation would leave Freddie Mac with a $200 million line of credit to the bank board. Kudlow wants to sever that line.
Maxwell told journalists after the meeting that his opposition to Freddie Mac's entry into the private sector was based on its bad timing. But he declined to say if his attitude would change. "It is up to the Congress to decide whether there should be more than one Fannie Mae," he said.
Freddie Mac was profitable in 1981, when Fannie Mae had its worst year ever, losing $190 million. Its first-quarter 1982 losses amounted to $42.8 million, and Maxwell said Fannie Mae will continue to incur losses in each quarter of this year if interest rates do not drop dramatically.
Meanwhile, the House yesterday voted to provide federal guarantees for hundreds of financially strapped home mortgage lenders to keep them afloat until crippling high interest rates finally decline.
The legislation, drafted by the Democratic-controlled House Banking Committee, will set up an $8.5 billion fund to guarantee the net worth of eligible financial institutions through paper transactions that would cost the government money only if an institution is liquidated.