Fannie Mae and Freddie Mac are pulling back on some mortgages meant to make homeownership more affordable, their latest effort to rein in risk at the behest of their regulator, the Wall Street Journal reported. The two companies are cutting back on the proportion of loans they back to borrowers with small down payments, for example, and mortgages to deeply indebted borrowers. The regulator, the Federal Housing Finance Agency, says it wants Fannie and Freddie to be prepared for a possible economic downturn. Tamping down risk could limit their defaults and produce bigger profits, which in turn could help them appeal to potential investors. The FHFA has made it a priority to get Fannie and Freddie out from under government control, but doing so will likely require the firms to raise billions of dollars from investors. Critics say the changes could run counter to Fannie’s and Freddie’s mission of making homeownership more accessible and affordable.
