Outspoken congressman Barney Frank has no shortage of critics, and they're sure to be out in force today. This morning, The Wall Street Journal reported that the chairman of the House Financial Services Committee, along with his colleague Anthony Weiner, is actually recommending that Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) relax their lending standards on condominiums.
The controversial request follows a decision by both Fannie and Freddie to tighten mortgage-lending standards for condos. In March, Fannie said it would no longer guarantee mortgages on condos in buildings where fewer than 70% of units have been rented, up from its previous benchmark of 51%. Freddie is due to implement similar measures in July. In a letter to the CEOs of both mortgage lenders, Reps. Frank and Weiner expressed their concerns that the higher standard "may be too onerous," and asked the lenders to "make appropriate adjustments" to their approach.
The lawmakers warned that the newly ramped-up standards could put a damper on condo sales, just as prices have fallen to attractive levels. Rep. Weiner told the Journal that Fannie and Freddie's cautious approach has "had a real chill on the ability to get these condos sold." Officials at the mortgage lenders might beg to differ, with Fannie reporting that it has approved hundreds of loans under the new guidelines since March. Both mortgage companies are preparing their official response to the congressmen.
Of course, there are some who would argue that relaxing mortgage standards in order to boost sales is exactly the kind of backwards policymaking that sparked the housing bubble and ensuing financial crisis. However, according to a report today in the Boston Globe, Barney Frank doesn't have much reason to bemoan the beaten-down state of the market. The paper says that Frank moved most of his investments into local and municipal bonds last year, resulting in healthy gains for his portfolio.
Considering the congressman's savvy investing style, it's a safe bet to assume he doesn't own stock in FNM or FRE. At last check, shares of both companies were down roughly 3%.