Regulator to loosen reins on lenders

WASHINGTON, Feb. 27 (UPI) -- U.S. regulators said they will lift growth caps on federally backed lenders Freddie Mac and Fannie Mae due to improvements in their accounting practices.

Growth caps, which limited the lenders to $1.5 trillion in mortgage portfolios, were imposed in 2004 after audits revealed more than $11 billion in accounting errors.

The restrictions will be lifted Saturday, James B. Lockhart, director of the Office of Federal Housing Enterprise Oversight said.

Wednesday's announcement resulted from the lenders producing timely, audited financial statements, Lockhart said. But, both companies had also made "substantial progress," completing numerous actions listed in 2004 Consent Orders. When these are completed, regulators could reduce restrictions further by reducing a mandated 30 percent cushion against risk over minimum standards.

Fannie Mae is close to completing the Consent Order requirements but Freddie Mac "still faces the requirement of separating the (chief executive officer) and chairman position," Lockhart said.