The House and Senate banking committees this week approved bills that would allow mortgage bankers to sell loans to the Federal Home Loan Mortgage Corp. This could result in an additional $2 billion being recyled into the residential mortgage market by 1979.
Under current law, only banks and thrift institutions have the right to deal with the corporation, an offshoot of the Federal Home Loan Bank Board. These competitors have been successful up until now in keeping mortgage bankers out because they feared their presence would mean more customers competing for the same funds.
The corporation, known as Freddie Mac, now finds itself desiring more capital to respond to the growing residential mortgage market. Recently it agreed to let mortgage bankers in.
Last year Freddie Mac made commitments to buy $5.5 billion in conventional loans and to issue $4.8 billion in mortgage-backed securities. (Actual sales run about 10 percent under commitments.) The amount of loans Freddie Mac could buy from mortgage bankers starting in 1979 would limited under the terms of the congressional agreement to 20 percent of its purchases. The agency has projected an expansion of up to $7 billion next year.
This year mortgage bankers expect to make $33 billion in loans, of which $6 billion will be in conventional mortgages. These loans are now placed in the private market, but mortgage bankers feel they need additional opportunities. Phillip Kidd, Mortgage Bankers Association economist, predicts that in 1979, members will account for something under $2 billion in sales to Freddie Mac.
The expansion, according to Kidd, is warranted by the great demand for mortgage money on the one hand and the necessity for finding new sources of funds. Every loan that is sold on the secondary market means more money is freed to originate more mortgages for home buyers. Thrift institutions and banks, largely dependent on local capital, cannot fill the need, he said, so large, national financial institutions like pension funds and insurance companies must be added.